Mar 132024

The current crop of clownish criminals in the House of Commons just goes to show that the regulation need a bit of a brush-up. Here’s a few of my suggestions :-

  1. Secret electronic voting. Which has the downside that we can’t see what our MPs voted for or against, but does allow them greater latitude in ignoring the party whip when it comes to things that shouldn’t be passed.
  2. Electronic voting should make this easier: MPs should recuse themselves when their vote could influence their income – for example MPs who are also landlords should not vote on motions involving landlordism.
  3. MPs should be allowed to do jobs outside of their work as an MP, but their income should be capped at an hourly rate equivalent to their salary as an MP; any extra goes into the general taxation fund. Sound unfair? There’s plenty of senior public sector workers with exactly that sort of contract. It would allow MPs to keep “in practice” but not encourage them to seek outside work.
  4. MPs who change party allegiance or lose the whip should be subject to the same recall petition mechanism that being found guilty of “wrongdoing” makes available.
  5. Accusations of lying should be permitted which should invoke an investigation. A false accuser gets sanctioned (which opens them up to a recall petition) and an accurate accusation gets the accused sanctioned (likewise).

I’m sure there’s a whole bunch more to add but that’s enough for now. I’m sure MPs will hate it, but to be honest, the more an MP hates a regulation, the more likely it is to be useful.

B&W picture of the sea and some old wooden posts.
Sep 202008

Lehman Brothers collapse, Northern Rock run, HBOS takeover. All were in theory good stable banks suffering slightly because of bad debt (US subprime) which may be why the financial markets are so twitchy about them. Even though the markets were in large part responsible for the takeover of HBOS (nothing apparently wrong with them – they just suffered an inexplicable share price collapse).

Now the US government is promising to throw hundreds of billions at the problem by buying up bad debt on top of the trillion dollars already used to protect the banking system. Probably a very sensible move.

But it is slightly peculiar that a freemarket government (and a particularly keen one at that) is bailing out private companies. Perhaps banking is a special case; after all we have seen a housing crisis in the US cause financial panic world-wide, even in industry sectors that have very little to do with banking. But if banking is a special case, it needs special treatment.

The traditional view is that intervention to save banks is wrong, because to rescue banks would encourage banks to take risks they would otherwise avoid. There would be some truth in that if in fact only banks with poor practices failed and the people responsible for bad practices did in fact suffer. Well, HBOS only “failed” (actually got taken over at a rock bottom price) because their share price collapsed for no good reason and because other banks may have been reluctant to lend to a bank in that situation. Lehman Brothers? Well their CEO isn’t suffering too much … he was paid a $22 million bonus last year, which is more than enough to last any reasonable person a lifetime.

Going back to the root causes of the current problems, we can see that it was initially caused by a great deal of irresponsible lending done in the expectation that with rising prices, there were huge profits to be made. Indeed the US is investigating numerous cases of fraud committed by the lenders.

Over the last thirty or so years, the trend has been to remove regulation from the banking sector to give it more freedom on the grounds that regulation was stifling the free market in its quest to make ever greater profits. As it has turned out the greed and irresponsibility of some lenders has shown that bankers cannot be trusted to behave responsibly without strong regulation or close supervision.

First of all, because banking is world-wide, any action by governments has to be done on a world-wide basis to avoid distortions in the banking market where a bank in a country with less stringent regulation would have an unfair advantage.

Secondly because bailing out bad banks has been and will always be so costly, banks should pay a higher rate of tax than other companies.

Finally each bank must have a supervising member on its board of directors who would attempt to identify bad practices and stop them.