By William K. Black
Quito: May 16, 2015
In my immediately prior article I discussed in detail Prime Minister Tony Blair’s May 26, 2005 speech calling on the UK to “win” the regulatory race to the bottom. In particular, Blair singled out the Financial Services Authority (FSA) for blistering criticism.
But something is seriously awry when … the Financial Services Authority that was established to provide clear guidelines and rules for the financial services sector and to protect the consumer against the fraudulent, is seen as hugely inhibiting of efficient business by perfectly respectable companies that have never defrauded anyone….”
Blair’s attack on the FSA bewildered and angered its Chairman, Callum McCarthy, who was busily eviscerating UK financial regulation in accordance with Blair’s earlier declarations of war on effective regulation. By 2005, the FSA was spineless and a cheerleader for the corrupt City of London – which McCarthy, in a pratfall of unintended humor, described as a “clean” center of international finance. Blair did not warn the FSA leadership in advance that he was going to excoriate them “as hugely inhibiting of efficient business.” The good thing, for those of us seeking to document the causes of the financial crises is that Blair’s rant provoked a written response from the FSA’s leader on May 31, 2005. The response proves that the FSA was a Potemkin regulator in the run up to the UK crises, that Blair knew that he and his government had destroyed effective financial regulation – and that his response to that knowledge was to order that any remnants of even modestly effective financial regulation be trampled into the City’s dust.