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Ben Chu: Strong meat from a poacher turned gamekeeper

Posted by Eagle Eye
  • Monday, 26 October 2009 at 11:21 am
I don't know whether George Soros's interesting personal history as a poacher turned gamekeeper makes his ideas on financial reform more or less credible. But his prescriptions for reform laid out in the Financial Times do seem to make sense on the whole: action from the authorities to prick asset bubbles before they get too big, heavy regulation of derivatives, forced reductions on leverage from large banks, a requirement on hedge funds to disclose their positions etc.

Yet his proposal to "vary the loan-to-value ratio on commercial and residential mortgages to forestall real estate bubbles", though probably sensible, strikes me as a political nightmare.

I can already hear the cry of the financial sector lobbyist: "This hardworking family were allowed a 100 per cent loan to value mortgage five years ago. Now the regulator is saying a new hardworking family today can only get a 70 per cent mortgage, which means they cannot afford their 'dream home'. People cannot get a foot on the property ladder. This meddlesome regulation must go!" It would be a brave government which could withstand pressure like that.

Pricking bubbles is easier in theory than in practice, not least because a lot of influential and wealthy people tend to have a vested interest in their expansion.



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