It’s the old solution of using criminals to catch criminals. Unfortunately, the criminals in the banks were just too high-paid.
No doubt heavyweight financial critic and Spear’s economics editor will weigh in (in his inimitable style) on Boy George’s abolition of the FSA and boosting of the Bank of England, but a few thoughts herewith nonetheless.
One of the key problems with the FSA was not that it was separate from the Bank of England, or that no-one had macro-prudential control of credit expansion, but that it could not attract as employees those who knew what was going on.
Worse than Rupert Murdoch, who is always one step behind the internet (‘Oooh, MySpace – let’s buy that’), the FSA was several steps behind the clever types in the banks who were dicing and slicing mortgages like Marco Pierre White in a rage. If you can’t understand what’s going on, how can you regulate it?
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This is because working for the FSA was not the limitless jackpot for halfwits that the years 05-06 were in the City, where the rising tide carried even those in the most impractical and badly-made boats. If the FSA had been able to pay massive salaries, with bonuses for catching the bonus-led, they would have attracted the right people.
It’s the old solution of using criminals to catch criminals. Unfortunately, the criminals in the banks were just too high-paid.
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