Famed financial journalist Anatole Kaletsky thinks the economy has stabilized, and that markets are showing signs of recovery because policy makers stumbled upon the five golden rules for regulating the banks during the economic crisis last fall.
Writing in the Times of London, Kaletsky said that U.K. Chancellor of the Exchequer Alistair Darling’s response to the financial crisis was "broadly right," especially after his "Pauline conversion" in mid-October to the necessity of offering unlimited government guarantees to all British banks.
According to Kaletsky, the paper's former economics editor and now a columnist on global financial matters, the five rules are:
First, despite the populist outcry against the banks, large and profitable financial institutions are indispensable in any market economy.
Second, financial markets are imperfect and often make catastrophic mistakes.
Third, banks aren’t just ordinary businesses and can’t operate by the same rules.
Fourth, because banking is so vital to the economy, but also inherently unstable, all banks must enjoy some government guarantees. This does not mean they should rely on the government to bail them out, but it does mean no bank can ever be allowed to fail in a disorderly way.
Finally, never again should regulators rely on credit ratings, the banks’ internal risk models or the management’s assumptions about economic variables such as house prices.
Kaletsky thinks that these five principles might ensure that future financial crises are avoided without killing the golden geese on which so much of the world's prosperity depends.
Not everyone thinks the economy is on the mend, so Kaletsky's "rules" might be premature.
The chairman of Barclays PLC, Britain's second-largest bank, said the "very nasty global recession" is going to go on for a while.
"I keep looking for green shoots; I don't see many," Chairman Marcus Agius told the Associated Press.
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