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Thursday, August 27, 2009

FSA Plays Politics

Fearful of being shut down by the incoming Tory government, the FSA has indulged in popular policies and made some suggestions wrt taxing bankers' bonuses.

Lord Turner, the chairman of the FSA, has stated in a discussion in Prospect magazine that he would be happy to consider the use of a new tax on banks to prevent excessive bonus payments.

He was quick to point out that the FSA was "not setting out any new policy", a that of course is a matter for the chancellor.

Lord Turner wants a tax on financial transactions that would cut banks' profits, thus reducing the funds available for bonuses.

Lord Turner's, and the FSA's conversion to cutting bankers' bonuses, may well play well to the gallery. However, it was during the watch of the FSA that the banking crisis (allegedly a result of greed and high bonus payments) occurred.

Where were the FSA then?

Unless there is a unified worldwide tax on banks, all that will happen (in the event that such a tax is introduced in the UK) is that the banks will move elsewhere.

This suggestion is a non starter, as Britain (like it or not) needs a robust financial services industry, given that we have no manufacturing base to speak of.

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