Thursday, 9 September 2010

Bureaucrats are people

In the comments to a previous post BK Drinkwater said:
1) People are often stupid
2) Bureaucrats are the same stupid people, with bad incentives.
Now Gareth Morgan writes in the New Zealand Herald on problems in the Reserve Bank to do with banking supervision,
But despite a plethora of taskforces, we still haven't paid any attention to the standard of competence that has undermined the Reserve Bank's prudential supervision of the banking system, which time and time again can be shown to have been the largest single piece of policy negligence of the past 20 years.

The officials responsible for it should at least be subject to an inquiry - not as part of a witch hunt but to make them justify (or not) the directives they've made to the banks - the bill for which we as taxpayers now have to fund.
A public self-examination is overdue for Reserve Bank governance of the banks - and we all agree, don't we, that taxpayer-guaranteed banks these days are little more than arms of government lending policies. Bring it on.
There are many question to be answered about the banking sector and its regulation. Officials from the Reserve Bank and other government departments should be held accountable for their actions. Problems with the Government guarantee scheme and South Canterbury Finance only highlight the need for a "public self-examination".


bk drinkwater said...

Must stress that the line is from Megan McArdle's blog. I can never find the link, though :(

Paul Walker said...

Sorry bk, you did say its was McArdle's line, I forgot to mention that. But I'm sure you would have said it had you thought of it!

Dave P said...

This does read rather like blaming the workers - even rather well-to-do ones - for unsound corporate priorities. It's a story that's repeated around the world, and I'd suggest that the issue isn't the calibre of personnel - like the rest of us, some doubtless brilliant and committed, others more-or-less competent & diligent, and a few lazy, useless or malign - but the culture in which they operate, and its associated worldview. The problem with laying the blame on "competence" is, competence for what, and evaluated by whom on what basis? Until that's resolved in more socially useful terms, you can sack the lot and the next batch will be just the same, doing what's "done", because that's the way we keep lurching from one of these episodes to the next. We need scrutiny of what's "done" rather than who does it.

Miguel Sanchez said...

I assume by "directives to banks" he means the Basel capital requirements, a standard which declares that collateralised lending is - shock horror - less risky than uncollateralised lending. And since they're the same worldwide it's hard to see how they're responsible for NZ sliding down the world rankings.

This sounds an awful lot like another fund manager whining about how the system is "biased towards property", to cover the fact that his own industry has systematically failed to deliver the goods. But our Gareth wouldn't stoop to that, right?