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.
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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?
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.