John Kay

Was there a “third way”, a politics which reconciled the market economy with the values of compassion and fairness that had traditionally motivated the political left? When was government interference with the operation of free markets justified, even necessary, and when did such intervention reduce choice and welfare?

The assertion that depositors in Kaupthing and Landsbanki have a claim on ordinary people who were too prudent to put money there, or did not have any money to deposit in the first place, has little justice or legal basis.

The true and fair view is subjective, and no accounting principles, however extensive, can cover all conceivable situations.

In the name of free markets, we created a monster that threatens to destroy the very free markets we extol.

Markets are not a well-oiled machine: they are a constantly changing, adaptive biological system.

When the next crisis hits, and it will, the frustrated public is likely to turn, not just on politicians who have been negligently lavish with public funds, or on bankers, but on the market system. What is at stake now may not just be the future of finance, but the future of capitalism.

Regulation as supervision can be simultaneously extensive and intrusive, yet ineffective and prone to regulatory capture. History suggests that supervision is rarely a success.

Government underwriting of deposits should be matched by assets of comparable quality. Otherwise the mismatch of risk provides an unjustifiable public subsidy to the banking sector.

The Reform of Banking Regulation
We should spend less time trying to ensure that our regulators can regulate financial behemoths with turnovers bigger than the GDP of many countries and more on trying to redesign the financial services industry so that regulation focuses on the interests of the public as consumers of financial services.
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