Stung by apple pie and ice cream

Avinash Persaud has a thought-provoking article The inappropriateness of financial regulation on VOX. I will return to the detail of his proposals tomorrow - they deserve a wide debate - but for now here is a stinging comment on the responses to financial crises:

In each crisis I have observed a “cycle” in the response to the crisis. In the middle of a crisis, when circumstances look dire and chunks of the financial system are falling off, proposals get radical. [...] But a few months after each crisis is over, these radical plans are tidied away and we are left with three things. And they are always the same three things: better disclosure, prudential controls and risk management.

These measures are the regulatory version of apple pie and ice cream. Who would say no? The thing is – we have been investing heavily in these areas for the past twenty years and do not have much to show for it in terms of financial stability.

Ouch, that hurts. But you have to say that he has a reasonable point.