Thursday, September 24, 2009

Time for a proper regulatory blacklist

We are heartened to see this emerging:

"U.K. Chancellor of the Exchequer Alistair Darling called for the Group of 20 to draw up a “blacklist” of countries whose regulatory systems pose a risk to the world’s financial system.

“Just as we have been tackling tax havens, we also need to go after those countries that offer regulatory havens where mainstream regulators here and in America and in Europe can’t get the information they need,” Darling said in an interview on Bloomberg Television today. “If you don’t comply you get until March next year then you will be blacklisted.”

See the video here. It potentially could be very good news - if it happens. Darling seems to have understood the link between the secrecy that secrecy jurisdictions provide, and the financial crisis.

“What we are saying to these companies is, ‘Look, you live in the same world as the rest of us; you enjoy the privileges when you travel that everybody else does,” Darling said. “You can’t shelter behind this veil of secrecy where we can’t get the information we need to understand the risks to which some of our institutions may be exposed.”

We fear it may not, and when it comes, the response will be feeble, and pander to the wishes of big, powerful countries, many of which are secrecy jurisdictions (which is the term we prefer, instead of tax havens.) The next paragraph in the story suggests our hunch may already be right:

"The measures would target countries such as Panama, the Dominican Republic, Turks and Caicos Islands and the banks and hedge funds that operate there. They’re on an Organization of Economic Cooperation & Development list of countries that haven’t implemented international tax standards."

So -- what -- the City of London, that gigantic regulatory black hole, will get a free pass?

If this is what happens, we will have 1998, all over again. The big guys go after the little guys; the little guys point straight back and cry "hypocrites!"; everyone shuffles in their shoes and says "er, they do have a point"; -- and the whole thing falls apart.

The general idea of a regulatory blacklist is right. What is needed now is politicians of courage to make the blacklist the right one.

In the meantime, we've got some fireworks of our own which we will be letting off shortly. Scroll down to the bottom of this blog - Steps 3 and 4 - to get an idea of what's coming.


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