Wednesday, October 01, 2008

We get what we deserve

To judge from the US press – which has "exploded" with news and discussion on the "mark to market" rule – David Cameron should be congratulated for yesterday putting his finger on the one issue which, in the judgement of an increasing number of experts, is wholly responsible for perpetuating the current financial crisis.

Putting this into perspective, one only needs to quote the Wall Street Journal editorial. It says, "Mark-to-market accounting rules have turned a large problem into a humongous one." Many experts, Congdon included, are attributing this rule to the failure of Northern Rock, Lehmans and, most recently, Bradford and Bingley, all of which were solvent by traditional accounting rules and need not have gone down.

The problem having been identified in the US, the responsible authority, the Securities and Exchange Commission (SEC) and the Financial Accounting Standards Board (FASB), which sets U.S. accounting rules, have moved with speed to "clarify" the rule, bringing comment from The Washington Post, the LA Times and hundreds of US media outlets.

There has been discussion on all the main US TV channels and the US blogs have been hosting a storming debate about the rule, its meaning and what needs to be done about it, with blogs like Powerline offering an example of the type of informed comment for which the best US political blogs are rightly valued.

So intense has been the discussion and interest that now, as the Paulson's "bailout bill" goes back to Congress, a proposal is being considered to scrap the rule altogether. If this happens, by the weekend, "mark to market" will be toast. If the experts are correct, the US banking system will be well on its way to recovery. According to some, it may not even need Paulson’s $700 billion bailout.

So, what of the UK scene?

Despite Cameron's perceptive - if belated - intervention, his exact comments have been retailed in only two mainstream newspapers, The Scotsman and The Daily Express, without comment or explanation. As for the "political" (or any) UK blogs – apart from this one - my initial search yielded only one which, with unintended irony, tells us:

Finally, he suggested that he would support the government in its endeavours to address the complex issue of "marking to market", a process whereby banks price daily their assets which, it is argued, is causing bank stocks to fall even further. The proposal is that this practice should be suspended. Quite how this would work, Cameron did not explain, therefore, we can assume that it will be challenging or perhaps, not even possible.
The author is dead right when he writes that, "we can assume that it (suspending the rule) will be challenging or perhaps, not even possible", the reason being that "elephant in the room", the fact that "the practice" is locked into an EU directive. Thus, while this issue in the US is being chewed over in 21,390 blog posts under "mark to market", the issue over here is simply not on the agenda. The media and the the bulk of the British political blogosphere are silent. The chatterati don't "do" Europe, policy or anything serious - with the (now) admirable exception of Centre Right.

Despite that, here in "Europe", the government is acting. Not the posturing bunch of fools we have in London, but our real government in Brussels. This we learn from Retuers with a piece published on the net, by Business Day - a South African magazine, for Chrissake!

This piece tells us that the EU will "look at whether mark-to-market accounting rules … could be eased." But that will not be until 15 October, two weeks hence. And, if they do "look", they will not make any immediate decision. For anything to happen, the whole laborious process of EU decision-making must kick in. It could be months, if not years, before anything is changed.

Thus, while Brussels fiddles, the banks burn.

That, more than anything illustrates where politics stand in the UK. Contrasted with the United States, where there are still some vestiges of democracy, the issue is widely chewed over in the public domain. Then, with speed, the authorities and elected representatives react.

In this country, where the power lies with Brussels, discourse is suffocated under a stultifying blanket of deception, so pervasive that the government does not even mention the problem.

We have a leader of the opposition who cannot even bring himself to mention an "EU directive" resorting instead to the euphemism, "international regulation". Nor does he dare to say that we have to go cap in hand to Brussels to resolve the issue but instead resorts to babbling about having "our regulatory authorities, together with the European regulators," address "this difficult issue."

Even what Cameron did say, though, should have sounded the alarm bells – yet nothing. When politicians actually talk about policy and solutions they are ignored. Small wonder they resort to the theatre. That is how they get the attention and the headlines.

The problem lies thus not only with the politicians. It lies with the media, with the bulk of the blogosphere and the rest, who prefer entertainment and trivia to dealing with real issues, real policies and real world solutions. To that extent, we get what we deserve and deserve what we get.

Behave like infants and you will be treated like infants. To see what happens when grown-ups get involved in politics, look to the US – and weep.