In the late 1980s the City of London reeled after a financial scandal involving a company called Barlow Clowes, the details are of little relevance for these observations save on vital piece of information, it was FRAUD.
Covered by English Law.
Such occurrences are part of financial history globally, they will continue to be so as long as human frailties exist. It is simply part of life’s great pageant.
Europe suffered the Mississippi bubble, South Sea bubble, Black Tulip hysteria, innumerable banking collapses globally & the post regulation 2008 British banking implosion & others in California recently, Silicon Valley, Silvergate & Signature.
Yet the regulatory screw has tightened exponentially arguably since 1913 the birth of The Fed.
So why doesn’t regulation work?
I was part of the fake British consultation procedure in 1986 when the heavy hand of the State intervened and succumbed to that ‘fatal conceit’ of which the great American economist Murray Rothbard warned us. To regulate a market first you need perfect knowledge of it.
Of course as with every State ‘consultative’ procedure it was a diktat, I resigned immediately as I smelt the wind, they just wanted names & numbers to game the system.
An absurdity in the fast moving world of financial services.
During the fake 1980s ‘consultation’ period I explained to the promoters of prescriptive rules that the concept was doomed to failure as no such perfect knowledge was possible that by definition regulation would always trail market behaviour it would simply be a rear view mirror, reactive & permanent stable door closing charade.
Moreover, I mooted regulation would be drafted by bureaucrats with no ‘perfect knowledge of the market’ but no practical understanding at all.
Years later I sat on the EU Economic & Monetary affairs committee, Brussels had superceded Canary Wharf where financial services expertise was non existent.
Politicians, (EU Parliament being an amending chamber) condemned to tinker with the ubiquitous civil servants’ pursuit of the impossible; obsessed with procedure not outcome.
Nor indeed in any serious public redress, not a single UK banker yet imprisoned, protected ironically from Common Law & puishment by a regulatory system.
As the only member out of the forty with senior investment banking experience I found myself explaining how some financial instruments worked.
The committee consisted of Danish housewives, Bulgarian trade unionists, French socialists, Italian communists & the usual flotsam & jetsam of Brussels political journeymen.
I found myself explaining what certain financial instruments & concepts actually were. Yet the committee were poised to legislate !
Investment trusts, a concept of mutual & diverse equity savings to millions of British & Dutch citizens was unknown in the rest of the European Union.
Call or Put options are not meat & drink to Bulgarian trade unionists.
The futures exchanges seem to the uninitiated a modern casino style gambling rather than a four hundred year old insurance system for farmers or miners subject to weather or Acts of God.
I could go on.
I return to ‘perfect knowledge of the market’.
Nearly all those involved are amateurs.
The same phenomenon is currently manifesting itself in automobile industry regulation to its horrific cost, but I digress.
In Britain the mutual fund industry suffered tragically.
The building societies disappeared, as did the life assurance companies.
Some of the names remained but the mutual structures went.
Remember the names, Scottish Widows, Provident Mutual, Scottish Amicable, Halifax Building Society, now owned not by members but by villains at BlackRock, Vanguard & others of their ilk. Economic vandalism fostered by flawed ideology.
The City of London & Wall St. are institutionally significantly more astute than the regulatory cohort.
What happened was exactly what I said would happen in 1986, no serious protection was ever offered as the 2008 disaster unfolded, yet the regulatory handbook in 2008 ran to four million words. Interpretation of the rules was left to subjective consideration, enforcement was not subject to any serious appeal procedure, just a judicial review.
Regulation by quango & enabling acts are in direct defiance of the concept of Common Law, the protection of citizens in both the USA & United Kingdom.
Presumption of guilt replaces presumption of innocence, no court of appeal, no trial by jury, no overt transparency of procedure.
Extraordinary
The horrors of the regulatory era are obvious to those who want to see them.
The big institutions have appropriated the entire procedure.
They write the rules, interpret them, adjudicate on them, issue summary fines they THEN POCKET THE FINES.
Big institutions manipulate commodity prices contrary to regulations but pay the fines which are considered simply trading costs. JPMorgan & Goldman Sachs are masters of the game.
In some cases regulations protect the wrongdoers.
I acted twelve years ago for a surgeon who had received appalling advice from an insurance salesman.
He lost £130k, it took a year to win the case, the regulator was limited to £100k compensation, the company paid up, the idiot salesman moved seamlessly on to another company.
Here’s the rub, the reason the case had taken a year the company defence was that the file had passed a recent external regulatory inspection. So no case to answer.
A regulatory inspection means a box ticking exercise by a very inexperienced inspector, all professional men know exactly what I am talking about.
Yet none of this is necessary.
Contract or Common Law would have covered every eventuality.
The whole nonsense is self serving. ‘Compliance’ is now an industry.
Broadcasting, financial services, water industry are all governed by regulatory often covertly politicized jobsworths. Social platforms are the next corporate victims.
I was thrown out of the Mansion House in 2009, the first man since John Wilkes in 1752 for heckling Lord Turner (long term chief regulator of all he surveys) he was lambasting banker’s bonuses having just paid his own staff bonuses after the biggest City regulatory cock up in history.
We now face in Britain a massive regulatory assault on
social media free speech contrary ironically to the somewhat flawed ECHR act .
English Common Law is all that is required, it has stood the test of time in England for over 1000 years, before even Magna Carta.
It is the legal shield for the man on the Clapham Omnibus or indeed Joe Six Pack across the pond.
Paid up associates of that weird genre the great & the good, civil service mandarins & political Ideologies are no basis for the control of multi £billion fast moving complex international industries.
I have worked in the past with old school two star mandarins, I’ve played cricket against them, I like them but to simplify my argument, sportsmen reading this ask yourself this, civil service mandarins are the ideal chaps to umpire cricket but would you make them Rugby League referees?
Still in favour of regulation?
State your preference, The Financial Conduct Authority? The Securities & Exchange Commission (USA)?
Or would you favour good old fashioned caveat emptor backed by Common or Corporate Law?
Godfrey Bloom retired from Financial Services in 2001.
Credit To Going Postal For First Publishing & Editorial
