Home > Finance and Economics, Politics > Be wary of politicians bearing committees

Be wary of politicians bearing committees

So Europe sets up an oversight committee called the ESRB to make recommendations and assess the financial markets in order to prevent the next financial crisis.  What a brilliant idea!  It’s a shame nobody ever came up with that idea before.

Too bad though, as the ESRB, like most bureaucratic self-congratulating committees will probably do nothing to stop whatever it is it was created to prevent.

Bloomberg:

The European Systemic Risk Board, which aims to identify and warn of brewing risks in the financial system, may fail to prevent future imbalances as it doesn’t have any legal power to enforce action, according to economists at ING Group,Barclays Capital and ABN Amro. […]

“The problem is that these bodies are set up to solve yesterday’s problems,” said Peter Hahn, a former Citigroup Inc. banker who lectures on finance at Cass Business School in London. “They can never do more than flagging any issues,” and whether they can stop a crisis “is questionable.”

The European Union is trying to avoid a repeat of the financial crisis that followed the 2008 collapse of Lehman Brothers Holdings Inc. and resulted in European governments setting aside more than $5 trillion to support banks. Part of a wider regulatory overhaul, the ESRB is similar to the Financial Stability Oversight Council in the U.S.

“The idea is excellent, but if the thing is not going to have any teeth, it is not going to be good enough,” said Nick Kounis, an economist at ABN Amro Bank NV in Amsterdam.

The piece is talking about financial markets, but you can substitute any other issue–healthcare reform, the housing market, whatever.  The point is that politicians and bureaucrats will always make themselves seem more important than they really are.  They do that by forming “committees” to oversee this or that emergency to make it appear as if they’re on the case and working to protect you–the citizen.  Meanwhile, they do it only to justify their political existence.

Like the article suggests, more likely than not, their actions will do little if anything to prevent said problems.  In fact, they can make it worse.  So remember that the next time politicians (Republican or Democrat) tell us not to worry, that they’re on top of things and forming committees and whatnot.

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