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Ben Chu

Ben Chu has been a leader writer at The Independent since 2004. Before that he worked at the paper on the comment desk, letters department and the personal finance pages. He studied history at Jesus College, Oxford between 1997 and 2000.

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Boris Johnson - would you buy a faulty boiler from this man?

Posted by Ben Chu
  • Thursday, 3 September 2009 at 11:15 am
Imagine that there had been a great global conflagration which began when boilers with faulty designs around the world simultaneously exploded. Imagine, then, that a politician from a country that had a large market share in the manufacture of those boilers began to lobby against a global effort to make their design safer. How would we regard such behaviour?
          Now consider that the London Mayor, Boris Johnson, yesterday went to Brussels to lobby against European Commission plans to impose regulation on the effectively unregulated hedge fund sector, much of which operates from London.
         
Of course, Johnson and others would take issue with the faulty boiler analogy. Hedge funds, they say, were not responsible for the credit collapse. And the EU directive to bring them under the regulatory umbrella is little more than a sly Franco-German effort to undermine the City of London. We must, they argue, stand up for a successful national industry which brings in considerable revenues to the British Exchequer.
          
It is true that hedge funds bear less responsibility than the international banks for the credit crash. But the collapse of the Long-Term Capital Management hedge fund in the US in 1998 shows that circumstances can arise in which governments need to rescue failed hedge funds, just like banks. This is why the US government has plans, henceforth, to regulate any financial entity which is large enough to be a systemic risk. In light of last year's disaster, the EU can - and should - follow.
        
The trouble with Johnson's lobbying is that it is fired by the old belief that the City of London is the goose that lays the golden eggs for the British economy and must not be interfered with under any circumstances. Never mind the costly bank rescues. Never mind the fact that Britain's over-reliance on the financial sector has made our slump especially painful. Never mind the catastrophic failure of the regulatory regime. Some of our political representatives appear to have learnt nothing from the past 12 months.
         
Obviously, there is no case for legislation that would vindictively kill off hedge funds (although the sector's performance last year ought to cause investors to be sceptical of the self-proclaimed genius of its managers and baulk at the ludicrous fees they charge). But proper and effective regulation of hedge funds, which do have the potential to contribute to a future credit crash, is as much in Britain's interests as it is in the interests of the rest of the world. Perhaps Johnson ought to start thinking less like a boiler salesman and more like a fire safety officer.

Comments

Johnson's lobbying
drg40 wrote:
Thursday, 3 September 2009 at 06:39 pm (UTC)
The tories have recently laid their grubby hands on £M2.5 for their funds from bankers.

What do you think they bought for their money except Cameron's silence in the face of his chums almost destruction of our economy, and Boris's lobbying in favour of hedge funds?

Remember this is the tories we deal with. Just because Thatcher has been disgraced doesn't mean the leopard has changed it's spots.
Re: Johnson's lobbying
ripsnorter757 wrote:
Friday, 4 September 2009 at 09:09 am (UTC)
Does your neo-lunatic post mean that you won't be voting Tory then?
Which party is going to have the 'benefit' of your X ?
Stop Following the Crowd...
popskihaynes wrote:
Friday, 4 September 2009 at 08:52 am (UTC)
Hedge Funds are neither here nor there in the story of recent events. You are also totally incorrect to imagine that under Gordon Brown there was any "Regulatory Regime", there wasn't. Of course the French and Germans want to clobber the City any time and in anyway that they can, the EU is and always was run for the benefit of France and German and on the basis of "bugger my neighbour".

The real culprits of the crisis are in order of "Guilt":

Politicians - it was an obviously unsustainable boom and they should have been cooling things down from around 2002 but didn't have the guts. In this country, Brown was repeatedly warned by the IMF from 2002 onwards.

Consummers - If it looks too good to be true, it is too good to be true. Greedy, lazy and total stupid but of course, who ever accepts the blame for their own stupidity ?

Banks - Expand or die led to ever decreasing financial underwriting and an insane desire to become the biggest Bank in the World. Barclays was saved by being out bid by guess who ? The lucky winner of a Dutch Bank. Of course we can determine that no one has learned from this when we look at the derelict hulk called Lloyds which was once a profitable business - BB - Before Brown and a word in your ear.

The trouble with people banging on about Hedge Funds, Bankers Bonuses and the like, is that they are no better than the chap who complained to the Steward about too much ice in his drink, after the Titanic had hit the iceberg.

Some things require concerted International action but sorting out this Country doesn't. We may, no we do need to reshape our Financial Institutions, which will mean separating Retail from Wholesale activities which may lead to paying a monthly fee for having a Bank Account and also a Credit Card rather than those costs being "hidden" but us in effect, still paying them.

Banks will need to be broken up because the real lesson is that there became too big to be allowed to fail. But the most important thing is that the UK economy must be rebalanced and directed to genuine wealth creation in agriculture and high quality manufacturing. Finally, as Mayor of London, what else do you expect Boris Johnson to do, drop his pants and grease his own bottom on behalf of all Londoners. Cut along now before your Skinny Latte gets too cold !
From Boris Johnson - No way
claimslondon wrote:
Wednesday, 21 April 2010 at 11:13 am (UTC)
Boris Johnson was in our town before he was elected and he made him self sound like he will be our best option but i know realise that even if i was to starve and he would serve me food, i would rahter stravee...:-)

Sarah
http://www.injuryclaimslondon.info
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