Lord Turner, chairman of the Financial Services Authority, spelled out yesterday what he thinks should happen to the banks and to regulation in the wake of the former's high crimes and misdemeanours. The Right has never much cared for him, and he antagonised it even more by voicing his opposition to watchdogs being charged with ensuring competitiveness in the City. He is quite right: forcing regulators to take competitiveness into account when making decisions leads to the sort of softly-softly, light-touch oversight that only the bonus boys think is a good idea now.
The trouble is the Conservatives have been banging on about this ever since the FSA was created. It might be an example of muddle-headed pre-financial crisis thinking, but it is also an ideologically motivated article of faith with them.
Where Lord Turner may also be right is in his analysis that free banking has to end if we are to get the sort of competition people want. Free banking is almost unique to Britain. To make it pay, banks have resorted to imposing sneaky, and sometimes ruinous charges on those who slip up by failing to remain in credit – and by selling sneaky, rip-off products such as payment protection insurance. Faced with that, and the inevitable fines and opprobrium it leads to, is it any wonder that new players are reluctant to join the party?
Theoretically, our watchdog could force a change to this situation, perhaps by banning cross-subsidies and forcing banks to charge. They'd actually quite like that, but it would be politically suicidal at a time when the electorate is bleeding from cutbacks, wage freezes and inflation.
Turner was on even shakier ground with his analysis of the FSA's past performance. He insisted, for example, that it couldn't have spotted the Libor scandal in its early phases. It would have been "prohibitively expensive" to police it, requiring armies of staff. Which ignores the fact that asking cleverer staff to peer into the City's dark corners could have worked wonders.
He claims the regulatory architecture pre-crisis was a mess (correct) but doesn't seem to see that the FSA mucked things up repeatedly. Nor does he acknowledge any personal failings. Well, no matter. His candour on so many subjects won't go down well where it counts. Don't expect him to ride into Threadneedle Street on a white charger.
He claims the regulatory architecture before the Libor crisis was a mess, but doesn't see that the FSA mucked it up