Friday, January 09, 2009

EVEN BLAIR NOW ADMITS THE FSA WAS CRAP

Speaking to the Financial Times Tony Blair, who created the FSA, admits that the light-touch approach taken by the whole regulatory system for The City was inadequate. But it's not clear that if Blair knew of the problems he would have stopped them anyway.

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From http://www.ft.com/cms/s/0/8b039386-dddb-11dd-87dc-000077b07658.html

In an interview with the Financial Times, Mr Blair implicitly accepted that the light-touch regulatory system instigated by his government for financial services had proved inadequate. “The point is to learn and learn the right lesson,” Mr Blair said. “This was a credit bubble and a product of a particular way of running the financial system and that has to change and change dramatically and fundamentally.

“And it is changing. It is not a problem of the whole free enterprise system.”

Challenged on Labour’s failure to impose more stringent controls before the credit and banking crisis, Mr Blair said the government would have acted if the regulators had warned of the extent of the problems. But he suggested that in the absence of such warnings, the boom meant tough statutory regulation was virtually impossible in political terms.

“Supposing a few years back I had said or Gordon [Brown] had said ‘we are going to impose these big new capitalisation requirements on banks’, people would have said you are mad. You are going to destroy the City of London. If you had tried making major changes to the regulatory system a few years ago when things were going extremely well you would have a big political problem,” said Mr Blair.

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