Better Regulation

The banking system, we are led to believe, will in future be subject to tighter regulation.

Good!

But if it is merely more hoops to crawl through, or greater political interference, we might as well give up. The City of London and financial services generally is one of our success stories, nationally and internationally, and if it suffers severe regulation it will cease to be a world leader. It needs to be creative. It needs to be innovative.

What sort of regulation does it need?

It needs to be watchful. Even people as remote from the action as I were concerned about some activities - the business plans of Northern Rock and Bradford & Bingley, for instance. Personal debt and Government borrowing were spiralling. There was a false bubble of well being.
It may have been the slapdash regulatory framework brought in by Brown, with confusion of roles and responsibilities, and the loss of centuries of bank supervisory experience. Whatever the cause, and despite warnings by many more qualified than I, little was done to reign in the excesses.
Any new regulation does not have to be more burdensome, it merely has to be more vigilant and reactive. Bankers are probably now ruing the way they behaved, but where were the regulators?

It needs to be clear of political interference. The present turbulence, with unsound actions by many financial actors, might have happened in any event. What is clear however is that sub-prime mortgages, said to the ultimate cause of our troubles, would not have happened but for the actions of political leaders. Presidents Jimmy Cater and Bill Clinton ultimately drove US lenders into being social rather than economic units, as they were compelled to lend to more poorer people. Many of these borrowers were never going to be able to service their debts, especially if interest rates rose. President Bush eventually saw the problems, made worse by Alan Greenspan driving down interest rates to stave off recession, but Democrats had gained control of the legislature and thwarted his attempts. In this country with inflation benign, partly because of cheap goods from China and elsewhere, and low interest rates, a debt financed boom was permitted.
You do not help the poor by trying to make commercial organisations act like charities and ignoring the build-up of huge amounts of debt in a "You've-never-had- it-so-good" dash.