DIGRESSION TWO - REGULATION

Children of the Lesser Gods - Regulation, and its social role. An interesting part of the current debate on the extent and quality of financial market regulation is the way it's sheriffs are themselves non-plussed about the nature of its effectiveness. I have commented previously about the multiple entities which regulate some elements of the Australian system, and those same features - multiple entities for the regulation and control of components of the financial markets - exist in almost all economies. The regulations themselves are legion, from Basel III, to Dodd-Frank, and FATCA, to the clearing house requirements for derivatives. This is, however, all superceded if we have the perpetuation of the globally significant banks/ too big to fail rubric which swamps all of the regulations. The regulation of national financial systems, and arbitrary assessments of what represents national significance, too often invade globally-relevent decisions. The ability of the US, either through its legal systems, or its regulatory system to impose burdens outside its geographic borders has created a cascade of copy-cat inflictions on dispossessed minorities. How else can the dire Cypriot decisions to impose effective penalties against normal bank depositors be otherwise interpreted than as a " who dares, wins" mentality which should over-shadow confidence for a generation. All because the European Union at least has one regard for the solidarity which is required to preserve the value of its currency, and the policy consequences which must flow from that. No such policy in both the USA and, for that matter Australia, where they would rather pass "dire" direct to the taxpayer....while letting the offending banks continue to give outrageous financial rewards to their executives. This is the regulatory effect of the deposit insurance or deposit guarantees for account holders....why, oh why, Australia did you give guarantees to corporate deposits, whilst at the same time those same banks also prevailed upon the Future Fund to take a slab of their wholesale funding needs ( did David Murray, as Chair of the Future Fund, influence any of these investments; why do we let the arrogant ANZ CEO carry on if and when his bank benefited from this 2008 largesse). Taxpayers were potentially on the hook any number of ways....where was the regulatory control here. Where does it exist now! By their nature, regulations are meant to moderate, and give effect to, legislative policy or powers. They tend to be hidden from the public's gaze, because they are technical, or detailed. But the public has a right to expect that they will not be so exercised as to massively increase the burden on those taxpayers without proper inspection, or at least, an appropriate review. The Fed already stands accused of being Semitic.... I leave the taxpayers to assess whether this is the Semitism they wish to pay for. But I, for one, wish to solely ensure that taxpayers have the social contract that they were born into. We did not agree to give unfettered support to banks, especially since they do not feel that they have any social obligation to pay homage to their fall-back options. Regulators have an obligation to be honest....I suspect too many have had " free tickets to the football " from their banking confrederes to properly regulate.