Shotgun marriages raise risk of future financial blowups

Finance chiefs are bleating at the prospect of being hamstrung by new rules designed to impose some health-and-safety strictures on their behavior. Governments should ignore their self-serving objections, even if imposing safeguards makes it harder for investment banking to create new profit-producing techniques and securities.

The siren song sung by finance is easy to summarize. Regulate us too strictly, the bankers say, and global growth will suffer because of our inability to innovate. Never mind that it was precisely that unfettered, self-non-regulating approach to the securities industry that brought the economy crashing down. The banking community, far from finding a way to make amends for its profligate behavior, wants to convince us that “business as usual” is the only way forward.

Some of the language being used is unbelievable. “Overly complex, opaquely priced products got banks into trouble,” Standard Chartered Plc Chief Executive Officer Peter Sands said this week. “Overly complex, opaque regulations simply cannot be the answer.”

Did you see what he did there? By starting with an assertive statement about the origins of the credit crunch, and then mirroring that with a negative statement about what regulation is aiming to achieve, Sands managed to trash the notion that his industry needs more oversight. Such hubris screams of lessons going unlearned.

The bigger the bank, the louder the protestations. HSBC Holdings Plc Chairman Stephen Green said this week it is a “fantasy” to believe that smaller, “narrow” banks will provide better financial stability. “Customers, both businesses and individuals, need a wide range of services,” said Green, who runs Europe's largest bank. “To force them to go to different types of institution for different services, according to some resurrected Glass-Steagall model, would be totally unrealistic.”

Errr, no. What is totally unrealistic is to continue with the broken model that allows bankers to gamble with depositors' funds in whatever derivatives casino they fancy, safe in the knowledge that the taxpayer stands ready to bail out their misadventures without sanction or punishment.

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