The US and UK regulators try to play better together

By Felix Salmon
January 22, 2010

There’s a lot of blame to go round for the chaotic implosion of Lehman Brothers in September 2008. But very high up the list is the utter lack of communication and cooperation between authorities in the US and the UK: while panicked all-nighters were being pulled at the New York Fed offices, no one attempted to bring the Brits into the loop until it was too late. And given that the only solution was an acquisition by a British bank — Barclays — the failure to have UK regulators on board proved fatal.

So it’s good news that regulators in the US and the UK have signed a memorandum of understanding, detailing how they’re going to work much better together in future. Except, the MoU only covers depository institutions, which means, I think, that it wouldn’t have helped with Lehman anyway. And then there’s the issue that the whole thing is, in the words of Paul Murphy, “complete guff“. There’s lots of passive voice (“as the condition of a Firm deteriorates, it is expected that cooperation between the Authorities will intensify”), and even more CYA (“This MOU does not create any legally binding obligations, … or confer upon any Person the right or ability directly or indirectly to obtain… any information”).

What’s more, there’s a risk that this kind of thing has the same deleterious effect that bilateral free trade agreements have on the WTO: if the UK and the US think that they have worked things out, then there will be less urgency to put together something genuinely international and comprehensive. So while Murphy thinks it’s all “a bit academic”, I fear it might even work out to be positively harmful.


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Hmm, might as well, or, the ‘bankers’ may all flee from NY and London to … China! And ruin my home country’s financial system.

Better keep them loopholes in and water down reform, so they stay put. We’re ruined here any ways, can get any worse.

Posted by jian1312 | Report as abusive

Bernanke’s zero cost of funds is heroic. I work for the website and I see the angst in people daily over things like home foreclosures and job losses, but it would be a whole lot worse if mortgages and small biz loans were done three percentage points higher

Posted by muchstardude | Report as abusive

It may be putting the dum in memorandum, positively harmful, even, but as the saying goes, “at least something positive will have come of this”.

At least those chaps were off the street for a couple of hours. Stiff upper lip, and all that.

Posted by HBC | Report as abusive

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