In response to Money Management’s latest comment piece from the editor – Nothing is holding back advice sector more than fear itself – one reader responds with his analysis of the regulatory system.
Sir,
Look, the financial services regulatory structure is not a ‘police force’. (And arguably neither is the actual ‘police force’ having been, since 1997, morphed into an instrument of public control, as opposed to an agent for the rule of law, the protection of private property and to keep individuals safe from coercion and violence by their peers and the state).
Comparing the FCA to a referee or traffic wardens is erroneous. In the first case, footballers welcome the existence of a referee as a neutral umpire in conflicts that occasionally arise on the pitch and a judge of fact. In the case of traffic wardens, they are (in theory) there to enforce parking laws.
The problem with the FCA is that it is not constituted to work within the rule of law at all. Its rules lack any legal certainty and are capable of whimsical interpretation by capricious bureaucrats. It has arbitrarily intervened in private contracts and destroyed private property, all based on very dubious research. The ‘research’ it carries out is entirely economically flawed, unless you believe in Fabian gradualism. Which leads us back to the FSMA 2000.
If you read the FSMA 2000 it confers a level authority on unaccountable bureaucrats that is entirely unacceptable in a free society. The act essentially handed over complete authority to the FSA to do exactly as it liked, free from any democratic, legal or financial accountability and with none of its operatives having any ‘skin in the game’. The act also emasculated the Bank of England (BoE), effectively handing full control over the money supply to Gordon Brown and the FSA.
Essentially the FSMA 2000 was a tool to proto-nationalise financial services by regulation. And taking away the BoE’s responsibilities enabled Brown to engage in a massive and unwarranted expansion of money and credit leading to a massive real estate bubble that exploded in 2008. The retail banks have been nationalised since 2001.
It is this that my peer group finds so annoying, yet I do not think many of them have had the time to sit down and think it through. Plus public choice theory has various analyses as to why there may be no advantage to them doing so, or plenty of advantage in going with the status quo.
Overall the FSMA 2000 and its progeny are Fabianistic wet dreams. Which is why there has been so much catastrophic failure in financial services. And it is why they need shutting down, or transferring back into the civil service where they are properly answerable to politicians and under proper democratic control. After all the whole point of these institutions is to serve the demos, not to rule it. Or am I missing something?
Regards
Steven Farrall
