Dow Jones down 4.6% - Worst fall since 2008

Thrugelmir

thor wrote: »

You also have to acknowledge that the tories were more banker friendly when they trotted out their proposals to regulate even less because they claimed the bankers could be trusted.

Little point in trying to rewrite history now. Decisions were made. Facts kept from public view. Be interesting when the cabinet papers for the period are eventually made public. As to who knew what when.

michaels

dunstonh wrote: »

Your description of the FSA is spot on. However, the politics side is perhaps a little unfair. It is probable that the Conservatives wouldnt have spent as much in the early 2000s as Labour did. John Major for all his faults, did leave the economy in a very good state and Labour benefited from that for a decade plus borrowed on top at a level higher than you would expect a Conservative Govt to do (for the things they borrowed it for). Labour significantly grew the public sector. Something that will cost us for generations (that is generally regarded as Gordon Browns doing rather than Tony Blair). So, entering the financial crisis, you can blame Labour for not building reserves in the good years and creating a heavier financial cost for future generations. Alistair Darling didnt do a bad job when the S hit the fan. However, in terms of financial regulation, both parties would likely have followed similar paths. Just as they are likely to do so again in a future generation when younger MPs without experience replace those that remember what happens when you deregulate.

The FSA was an expert at micromanagement of the insignificant whilst ignoring the major issues. The FCA has improved significantly. Just wish the EU directives were less damaging and more focused.

Yes, we will never know how regulation would have worked out under the Tories - perhaps just having the box ticking of the FSA encouraged the BoE to take its eye of systemic risk that would have been considered otherwise.

Although I suspect the Tories would have assumed the market would manage the risk by penalising banks who were taking too much risk through their share price and credit-worthiness but what happened was of course a black swan event which it turned out the markets were not able to cope with (or would have handled via a 30s style crash and depression).

Thrugelmir

michaels wrote: »

Yes, we will never know how regulation would have worked out under the Tories - perhaps just having the box ticking of the FSA encouraged the BoE to take its eye of systemic risk that would have been considered otherwise.

On public record (now) that Mervyn King was already talking to the US about the necessity of recapitalising of banks globally in March 2008. Lehmans didn't collapse until the September. Brown then claiming the credit for saving the global financial system, in Oct 2008) with hindsight appears more of a backside covering exercise to protect his reputation.

Brown's action in 1997 of giving the BOE independence. Was positive in some ways, i.e. interest rates. However he stripped the BOE of any power to regulate the banks.

westernpromise

michaels wrote: »

Yes, we will never know how regulation would have worked out under the Tories - perhaps just having the box ticking of the FSA encouraged the BoE to take its eye of systemic risk that would have been considered otherwise.

Although I suspect the Tories would have assumed the market would manage the risk by penalising banks who were taking too much risk through their share price and credit-worthiness but what happened was of course a black swan event which it turned out the markets were not able to cope with (or would have handled via a 30s style crash and depression).

It's very simple. Labour dismantled a regulatory regime under which saw no bank failures and replaced it - for no reasons other than ideology - with one that failed catastrophically the instant it was tested. They were explicitly warned this might happen because of how the FSA was designed as early as 1997 by Peter Lilley. They ignored the warning.

The crash was Labour's fault and so is the continuing debt and deficit.