Politicians told not to blame the banks

Dec 30 2010 Huddersfield Daily Examiner

POLITICIANS have used the financial sector as a scapegoat for the worldwide economic collapse, claims a report.

The study, published by the Legatum Institute and the Taxpayers’ Alliance, warns that governments pushing to tighten banking regulations could increase the chances of future meltdowns.

The report says policymakers across the world are in danger of learning the wrong lessons from the crash of 2008 and says the “rush” by organisations, including the European Union and G20 to shackle the banks could be dangerous for the world economy.

The document accuses governments of trying to “dodge” their responsibility for the meltdown by unfairly shifting the spotlight onto the financial sector.

“Some of the measures announced are disingenuous political posturing, while others continue existing mistakes, partly responsible for the problems we are facing today.

“It is entirely possible that the new regulations being implemented could hurt established financial centres like the City of London, while increasing the frequency and strength of global financial crises,” says the report.

The report blames the credit crunch crisis on US regulations that encouraged the relaxation of restrictions on home loans and the “nationalisation of risk” by the intervention of government-backed lenders Fannie Mae and Freddie Mac.

The report’s co-author, Matthew Sinclair, director of the TaxPayers’ Alliance, said: “The crisis was the result not of too little regulation of the financial sector but the wrong regulations.

“Unfortunately, there is a serious risk that politicians trying to build ever more closely harmonised global regulations will create nastier and more frequent global crises.”