The banking lobby, in response to the Government's latest White Paper, has mobilised the usual battalions. Screw the regulatory clamp down too hard, they say, and you'll kill the City of London goose which lays the golden eggs.
Why do we take this seriously? All the evidence suggests we would be more prosperous with a properly regulated financial sector. Spain forced their banks to hold more capital in the boom years. Canada had tight regulation of its financial sector. Both countries have weathered the credit implosion significantly better than the US and Britain where we pretty much left the banks to their own devices.
Their banks might have produced less tax revenue for their treasuries in the credit mania, but they didn't need bailing out, at vast public expense, when the bubble burst.
As even Adair Turner, the head of the FSA, has conceded, many of the boom profits of our reckless banks were illusory. Those golden eggs weren't real. Isn't an untamed City of London less like a beneficent goose than a cuckoo in the nest, greedily sucking up resources and forcing the rest of us to submit to its will?