Ali’s blog

Mostly quant stuff with occasional digressions

Self-regulation for banks

Posted by alifinmath on April 11, 2008

In the FT today:

Banks will never regulate themselves other than cosmetically.  Even if each bank were to agree that it would make collective sense to for each and every bank to observe certain practices and to desist from others, the temptation to defect from the agreement will prove irresistible as soon as the next financial boom starts to purr seductively and the next sure-thing money machine is touted by a new vintage of charlatan quants.

So there needs to be new regulation. …

I agree with all this (and I recommend a careful reading of the whole article), but the problem is that this flies in the face of the ruling neoliberal ideology of the last three decades (i.e., unfettered markets work best, markets are self-correcting, the “invisible hand”, greed is good, and the devil take the hindmost). Without some other ideology any attempts at regulation are going to be half-hearted, makeshift and patchwork. I imagine that some consensus on “reform” will be worked out in ruling-class circles over time and that this will be passed on in the form of detailed instructions to the political whores (president, senators, congressmen). At the same time I’m convinced that whatever ruling-class consensus emerges will be inadequate and insufficient. These systemic contradictions in contemporary financial capitalism can’t be tackled by the beneficiaries of the system.



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