I agree and of course so would the Great Adam Smith. He warned us in some detail about “externalising risk onto others”. The level of risk determines the profit, but profits must always be kept to a minimum and wages at a maximum. There should be little financial rewards for those that place the money of others at risk (i.e. the odious “dealers” that were the ruin of many a nation), rewards come when you place your own money at risk.
As for the “systems” that Ross discusses: Smith wanted markets in areas where there was transparency and good information (you can get a Noble Prize for that type of thinking these days), but where it was not possible to determine the quality of goods and services because they were, so to speak, opaque, he called for external quality controls. The assaying of gold and silver by the Guilds was his example (although again the Guilds needed reforming).
Smith’s answer to your final question is that we should give a resounding “yes”. But of course governments will continue to kowtow to bankers and the masters of industry - vanity and the lust for power still holds sway.

Ah Adam Smith, the real economic poster child of that little town in The Kingdom of Fife.

Unfortunatly one Gordon Brown of the same town wishes to assume the mantel whilst directly contradicting the advice…

When I heard GB admit he had not seen the effects of the housing bubble etc comming my mouth dropped. Not because it was not obvious he and others had been “fiddling whilst…”. But because he thought he could get away with a “hey guys I’m human too” ruse to cover up his compleatly inadiquate level of competance.

Having worked for a couple of companies in the Far East in the 1990’s, I was aware first hand of what a property bubble / spiral could do to a nations economy and those dependent on it’s well being.

In 98 I decided that the UK had got to the point it’s property market could not be sustained any longer and nor could the attendent rising personal debt from easy credit.

Having put “my own house in order” I am more than a little upset at having to pay for the price of GB’s clique of “influencial industry advisors”, as I suspect are many readers of this site.

However I’m not sure that regulation is the answer. In the US in response to the likes of Enron, their legislature gave a blank sheet to the auditing industry and said tell us what to do.. The Sarbanes-Oxley Act was the result. And as we now know it was compleatly inefective. Even where Congress had dictated that there should be an independent audit body of the two largest motgage issuers in the US (FM&FM) over 100 government employed auditors compleatly failed to raise any warning flags.

I suspect that as Ross and others think the only real way to prevent this sort of thing re-occuring (in another way) is to stop industries forcefully externalising risk onto others and for greater transparency in action and accountability.

However are we as a society ready or willing to pay the inevitable consiquences of this?

Of course Smith heaped even more scorn upon the legislators, believing they would always be in league with the dealers and masters of industry to oppress the public. Looks like he got it right.

On a more serious note, I would class a “National Fraud Reporting Centre” as yet another detriment to our privacy and civil liberties. There is no requirement to setup centralised policing for this issue, and I seriously doubt it would ever be effective.

What needs to be done is for the government to enact clear and unequivocal legislation to say that unless there is proof that a customer has defrauded the bank (which I image would be a fairly rare occurance), then the liability lies firmly with the bank. It shouldn’t be the situation that the customer has to prove there hasn’t been fraud which is contrary to our basic principles of law (since fraud is a crime).

It is then in the bank’s interests to improve its security and put itself in a real position to be able to prove who authenticated a particular transaction.

Having a national reporting centre just encourages the state to collect more data on us, and makes yet another of the bank’s expenses the tax payer’s expense.

I’m wondering if the recent “harassmant” case British Gas lost is going to wake the banks up.

On thing the Judge decided was that “blaiming the computer” was not a liability get out as the computer is programed by humans.

He had some other choice statments to make that appear to relate aplicably to the banks especially (ie not being able to identify a controling mind does not mean that it is not still harassment…).

It might just unravel a few cosy little cartells based around revolving door employment between Governement Depts and the Banks and other financial businesses.

More fraud is committed by 1st parties than 3rd Party actions such as theft and cloning. So this area needs tackling too.

If you want to attack anyone attack the government and the police who would never assist the banks in the past with fraud, as they saw it as a victimless crime. The banks, however, have always insisted this is not the case and spend vast sums to try and prevent it.

If you want to determine the causes of fraud just look to the thousands of useless items of legislation this government has put through in the past 12 years instead of enforcing the legislation that was already in place.

Most police authorities had done away with cheque fraud teams and fraud investigation over the last 20 years.

I guess the Government probably thought they could introduce a tax on fraud to add to the coffers they have wasted already but realised that it was probably not feasible, so instead we will recreate wheels and have lots of quangos looking at the problem with no one taking overall responsibility in the government or the police.

If it isn’t car crime, speeding, or a way of generating revenue then there is no way that this government will do anything about fraud - except perhaps to see if they can legitimately conduct it to raise revenue.

As for the FSA - this has been another quango wholey reactive in its actions with no concept of the real world and how to Oversea best practice and regulation in the finance industry.

Hey ho - nothing changes - but don’t blame the banks.