What Regulators Are For

Last week the Financial Conduct Authority proposed as its contribution to solving the housing crisis to “look at the products and markets that are developing to ensure they work for consumers.” This week it was the turn of the Bank of England’s Financial Stability Committee to address the housing crisis. They were, however, no more concerned about the housing needs of working families than were the Financial Conduct Authority. Their concern was with “wider financial stability” which they saw threatened by bank lending to the buy-to-let market. “Wider financial stability” is banker-speak for avoiding another banking crisis. Fuelled by Quantitative Easing, the policy whereby the government prints money and gives it to the banks in the hope that they will lend it to UK industry, the banks chose, instead, to increase lending for buy-to-let by 40% since the 2007-8 banking crash and bailout. This increase has been a major factor in escalating house prices. The Financial Stability Committee is right to be concerned that another banking crisis could be triggered by a collapse in the buy-to-let market, but just like the Financial Conduct Authority, they are focussing on the wrong needs: those of banks and financial services providers, not the unmet needs of working families.

Needless to say, the Financial Stability Committee refrained from suggesting that the government should regulate or restrict bank lending even though it is effectively with our money. The role of a regulator in a market economy is to bestow legitimacy on markets and the accumulation of capital. Protection of ‘consumers’ is very much a secondary consideration and protection of workers completely out of the question. Appointed by ministers but supposedly at arm’s length from the government of the day, their true independence is as fictitious as that of the judiciary and the police. We should not be surprised when they represent the interests of the 1%, not the 99%.

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