In response to an FT article by John Kay on 26th August 2014, entitled 'Arbitrage wastes the talents of finance's finest minds'
Voila, the nub of it:
"Many regulators still cling to the hope that regulatory arbitrage could be eliminated if only rules were sufficiently extensive and sufficiently carefully prescribed. But this is an illusion."
"One remedy is to allow regulators more discretion, so that they feel confident in implementing the spirit rather than the letter of the rules. But this would require a dramatic and permanent shift in both the calibre of regulatory staff, and the balance of political influence between regulators and those who engage in regulated activities"
Yes, I would go so far as to say that young regulators are 'groomed' for more lucrative employment later, if they play nicely now.
'The better response is to find simpler and more robust principles of regulation'
Yes, Glass Steagal was 37 pages, Dodd Frank 14,000. You can say, rightly, that finance is more complex now. I can also tell you, after 30 years in business, that when a powerful lobby doesn't want something, but is unable to block it, they slow it down, do all they can to remove its teeth, and make it as complicated as possible.
If Congress had any integrity, which is another way of saying, if it wasn't on the payroll, this could be changed. Failing the election of a few hundred Ron Paul's, and so long as Presidents pander to Wall Street bagmen like Hank 'I saved the world' Paulson, Timothy 'It was nothing to do with me' Geitner and Eric 'I've got a legal practice to go back to' Holder…nothing will change. President Obama had his chance, he blew it - he capitulated to the banks before he even got there.