The UK's FSA chairman has a point. Unfortunately, the longer the recession or "it still feels like a recession" continues, it's hard not to look at the banker bonuses which were completely unjust. While it would be nice to see policy changes, from a distance, it looks as though many politicians have slapped themselves on the back for taking action against the banks. Unfortunately out in the real world, that success is much less impressive looking. It also sounds like a reach that we should expect the same political leadership who signed off on the initial policies that led to the meltdown, then signed off on the bailouts which rewarded bad behavior, to effectively implement serious change.
In that context, how seriously should anyone expect policy reform? Heck, we now have the Obama administration wilting in the sun from criticism of his administration being too harsh on business. Rather than looking around at the support throughout the US and across party lines for serious reform, Obama has decided to listen to the Wall Street voices and be even more receptive to their needs. And we're to expect policy change? In the UK, does the FSA's Jonathan Turner honestly expect the Tories to propose serious reform?
In a speech to a City audience at the Mansion House, Turner said that there had been "some absurd bonuses for excessive risk-taking" and admitted that bonuses needed to be regulated to discourage the practice.
"There was an explosion of exotic product development, which last year I labelled as socially useless, a phrase from which I in no way draw back," he said. His criticism had been targeted at complex financial instruments such as collateralised debt obligations (CDOs), which were at the root of the credit crunch.
But he added: "We also need to move beyond the demonisation of overpaid traders to recognise, that in finance and economics, ill-designed policy is a more powerful force for harm than individual greed or error, and to ensure that we address the fundamentals of what went wrong."
