81716766

Deregulation saves the nation …

Lots of stuff in the blatts about the unique advantages of the “deregulated”, “open” even, ye gods and bum pills, “free” financial markets of the USA, and how they represent a crucial advantage of that great nation in coping with trouble. I don’t propose to get into arguments about whether American markets are better than anyone else’s, because there’s a fact of the matter; when it comes to markets, bigger is better, and American markets are the biggest, so they’re the best. But if there’s a big boat full of gravy out there for anyone with a free and deregulated financial sector, then speaking for my European brethren, I gotta get me some of that. With this in mind, D-Squared Digest would like to put forward the following urgent four-point Deregulatory Plan to bring us into line with the land of the free:

  • In order to help us come into line with “US equity markets, the freest in the world“, Europe should immediately impose numerous restrictions on short selling (such as the NYSE uptick rule), require that derivatives be traded on different exchanges from the underlying and introduce “circuit breakers” halting trading if the market falls too far.
  • In order to reduce “European governments’ use of the banking system to help promote social goals“, Europe should immediately abandon its strategy of using state-owned subsidised banks, and should instead pass an equivalent of the Community Reinvestment Act, regulating and pre-empting private companies’ decisions about who they want to lend to.
  • In order to ensure that we no longer have to suffer “failing companies propped up because of their political importance“, Europe should immediately fall into line with the USA by removing the State Aids directive which forbids government bailouts and change its bankruptcy code to make it as easy for insolvent debtors to continue trading as it is under Chapter 11.
  • In order to reduce “the plethora of red tape which stifles innovation“, all European states should immediately establish three different types of bank, each with a different regulator, along the lines of the OCC, Fed and the individual state banking commissions, and no very obvious way for anyone to tell which type of bank is which. Securities and derivatives regulators will have to be split in each country, and the Banking Co-ordination Directive which allows an institution chartered in one Member State to do business across the EU will need to be repealed. Foreign banks will obviously need to be subjected to yet a further entirely different system of regulation.

Only in this way can the backward, stagnant and sclerotic regulatory systems of Europe approach the model of clarity and nonintervention with which the US provides us. Perhaps one day, European financial institutions will be able to employ as few compliance officers and lawyers as their American counterparts!

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