Is the FSA for real?

The FSA, that long discredited regulator is coming up with farcical ideas as they reach the end of their lifespan.

We have had a suggestion that bankers bonuses should be regulated, which is highly fashionable at present, but based on little reality. We have the FSA championed by the Darling, suggesting that if the banks went back to pre-1985 Big Bang, then there would never be another bail-out needed and we have the FSA once

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again supported by Brown, supporting loan regulation.

I am no fan of bankers, but it would be nice to have a little reality.

Bankers bonuses: The bonuses are approved by shareholders. If the shareholders do not wish to take the risk profile suggested by the Directors, there is a simple way to achieve change. Vote against the Directors resolutions at theAGM . But of course the Shareholders have historically been the pension fund managers who sit as non-execs of the banks. However there have been numerous proposals put forward regarding shareholder revisions, but theFSA choose to ignore this reality. In today's climate, the banks who are causing the greatest concern are the banks in which the tax-payer holds a significant shareholding, so the answer is to ensure the tax-payers vote No. But dear old Darling doesn't like simple answers as it clears the decks to easily and the mainstream media just love to hate anyone, so tarnish all bankers with the same brush. The banks who took no funding do not deserve any cut back on bonuses, but that doesn't suit the climate.

Dividing the banks, so that there will be no further bail-out: What trite rubbish, where do Governments and the largest businesses secure complex financing? Funnily enough it isn't from a retail bank. However Darling, Brown and Myners would have us all myopically walk in to a situation that the banks are split as per pre-1985 and all is hunky dory. Let's run that one again, A.N. Investment bank fails, on which the US Government, China, the UK Government and Unilever are reliant on a syndicated finance agreement and the Government would just let it fall like a ton of bricks? How stupid is Darling, or how stupid does he think the population is? Failing retail banks are a problem for the general public, but failing Investment banks are the death knell to capitalism.

Tightening credit, there are a myriad of examples here, but let's take a simple one:

Joe Bloggs earns £100 000 a year and wishes to purchase a property, which is a little run down for £250 000 but he also want to spend £50 000 on refurbishment. Under the proposed FSA rules he could borrow a loan for a house valued at £300 000 on his salary, but borrowing £250 000 plus £50 000 to refurbish the place is an unacceptable Loan to Value, so is a no go: absolute madness. He therefore needs to borrow the additional £50 000 as a personal loan over perhaps 10 years at a far higher rate of interest and monthly repayment than borrowing that money as part of his mortgage.

One more example: Jane Smith has a house valued at £140 000 which is mortgaged at 100%, she also has credit card debts of £10 000 and a personal loan for £5 000. Is the FSA suggesting that LTV is the absolute measure of credit worthiness? What about Andy Pandy, who has no house but want to borrow £2 000, should his personal loan be asset backed?

It is all good knock about media stuff, but the crew running the regulators really need to join up their thinking a little.
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