Adair Turner, the chairman of Britain’s Financial Services Authority, comments on ideas to reform regulation and banking in the wake of the financial crisis.
The ideas included a so-called Tobin Tax, or a levy on banking deals to redistribute profits to the world’s poor. He made the comments to Prospect Magazine.
“If increased capital requirements are insufficient I am happy to consider taxes on financial transactions -- Tobin taxes, after the economist James Tobin. Such taxes have long been the dream of the development economists and those who care about climate change -- a nice sensible revenue source for funding global public goods.
“It may well be that we will make overt what is reasonably implicit already, that all their major operations are somewhat stand-alone businesses with their own liquidities and capital, and we simply agree in advance that it is not the responsibility of the Spanish government to necessarily bail out the whole of Santander (SAN) if it ever got into trouble.
“It is expecting an awful lot of a regulator to then sit down and redesign the entire financial system to create better value-added for society.
“If you want to stop excessive pay in a swollen financial sector you have to reduce the size of that sector or apply special taxes to its pre-remuneration profit.
“Clearly, not all innovation should be treated in the same category as the innovation of either a new pharmaceutical drug or a new retail format. I think that some of it is socially useless activity.
“Financial innovation has produced some products of very dubious social value.
“It’s clear to me that the FSA has to be very, very wary of seeing the competitiveness of London as a major aim, and that’s not a popular thing to say because it has been defined as an aim -- not as one of our primary objectives, but as a consideration that we have to take into account.”
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