Radical powers for financial regulators to step in to stop banks around the world overextending themselves with “catastrophic" consequences will be proposed by Britain today.
Alistair Darling will suggest that the Financial Services Authority and its counterparts elsewhere should monitor the overall financial positions of banks and other institutions to preempt irresponsible behaviour.
I'm fully willing to admit that we might need different regulation. I'm also open to the idea that this might mean more regulation, just different regulation or possibly even less regulation.
But I'm not open to the idea that those who do the regulating will suddenly become omniscient. It isn't just that the incentives faced by those who regulate will never lead to such wisdom, it's that no one, in any system of incentives, ever will be.
Further, I'm absolutely certain that those who do the regulating will not be any wiser than those who currently do such regulating. Which is really something that we might want to worry about before giving them the power to decide what is "irresponsible" and what is not. For example, informed gossip is that those currently regulating the banks are asking for the impossible.
The banks are being told that they should both be lending more money (possibly a desirable state of affairs) and also bolstering their capital rations (ditto possibly a desirable state of affairs). The only problem being that these two possibly desirable states of affairs are in fact mutually exclusive. One can do one or the other, but not both.
In Alice in Wonderland of course you could believe two impossible things before breakfast: but that's probably note quite the tome to provide the guidance for the regulation of the international financial system.
So, as I say, while I'm all ears about what changes we might want to make to regulation, perhaps not this specific one then, eh?