Public Lecture on Regulatory Purpose and the Rationale for Intervention in Capital Markets

Professor Justin O’Brien, University of New South Wales,  will give a public lecture Back to the Future: James M. Landis,  Regulatory Purpose and the Rationale for Intervention in Capital Markets on Monday 28th January at 6pm, in Newman House, St Stephen’s Green, Dublin 2. This lecture addresses contemporary problems of regulatory design through exploring the history of financial markets regulation. Attendance is free but booking is required at,159217,en.html.

By Colin Scott

Colin Scott is Principal, UCD College of Social Sciences and Law and Professor of EU Regulation and Governance at UCD. He is a Co-Editor of Legal Studies (Wiley-Blackwell).

11 replies on “Public Lecture on Regulatory Purpose and the Rationale for Intervention in Capital Markets”

The Irish Times – Wednesday, November 24, 2010

We are a global laughing stock – but IMF gives us hope

The events of this week give the State a unique opportunity to force a radically different political compact, writes JUSTIN O’BRIEN

IT IS time for some hard thinking. It is time for a full and frank admission of abject political, corporate, regulatory, and academic failure. This centres not in the handling of the boom but in the increasingly pathetic attempts by each sector to advance solutions. These, in fact, serve only to enhance the self-interest of each specific community of experts rather than the collective good.
The Government has lost any credibility to negotiate what amounts to a baleful settlement. Mortgaging the future in the hope that any potential IMF-EU bailout demonstrates international confidence in Irish political governance is at best spurious, at worst a defenestration of modern democracy. It is increasingly clear that the banking sector either misled the Government about the extent of losses in order to suck capital into an abyss, or was facilitated by Department of Finance officials who knew little, or cared less, about the social consequences.
There is no place to hide for either Government or Opposition. The performance by Pat Rabbitte on Prime Time last week was, at best, risible. It was a low point in an already poisonous and vacuous debate. Would any patriot determined to protect the nation not disclose reality? What price political calculation? How, after all, could anyone take Irish political discourse seriously when, without interruption, the former leader of the Labour Party could intone that the Government had bankrupted the country. After all, was the Government not merely following the alchemistic remedy favoured by successive administrations since the formation of the International Financial Services Centre, whose regulatory failings were continuously ignored?
As with the artificially low corporation tax, seen as predatory by our European allies, but by the boyos we secretly admired as a great scam, our commitment to common market has always been suspect. Donning the green jersey was great craic if you could be assured of winning by corrupting the game. Recent performances in Sydney by those charged with selling the message of Ireland Inc only adds to the sense of gloom. Come to Ireland, the regulatory environment has no negative tax implications. Nothing has been learnt. It is a national and international disgrace. Instead history has been rewritten. Problems date only to 2006.

The performance of the Irish academic community has not been much better. The Irish Economy website, which began with such promise, has degenerated into ad hominem rants and self-congratulatory self-promotion. “Oh, I have been quoted by the New York Times , therefore I have credibility”; “Oh I have a blog at the Guardian. How clever”; “Oh, I have a solution: Let’s simply have mass mortgage forgiveness”.

Screw the Europeans; we always have; we always will; always wrapping the flag around us; always pretending we are true Europeans. The treatment extended to eastern European migrants displayed all too clearly the baseness of a society drunk on the spoils of illusory wealth. The enormity of the hubris is captured by the fact that warnings are pre-dated to an article written by Prof Morgan Kelly, in The Irish Times in 2006. Kelly is a rare economist in Ireland, both for his (belated) forthrightness at the time, which of course was self-evident, and his humility in a recent article in not knowing what the answer to our problems could be.

Dating the crisis to 2006 is nonsense as anyone living in the glorious metropolis of Dublin from the mid-1990s onwards could tell you. I recall looking at an apartment in the former Johnston Mooney O’Brien site in Ballsbridge in 1996. My accountant, one of the shrewdest in Ireland, told me the price, IR£122,000, was madness. He said the multiples were out of kilter. Having lived through the boom-bust of London, I demurred. Looking back one can see the rot even then. It was a time when Dublin wakened to the reality of cafe latte and lost the run of itself. Personally, I escaped to Belfast, where a similar boom emerged, largely fuelled by the same Irish banks that have brought both parts of Ireland to the edge of a precipice.

I left Ireland in 2006 for Australia, when commercial rents on Royal Avenue in Belfast rivalling Oxford Street merely cemented the irrationality of a system that everyone had a vested interest in protecting. Now looking back from Australia, I see the abiding value of the regulatory system that attends to purpose and the dismal reality of a nation that never really had the wealth that catapulted it up the European league table.Like Rodney and Del Boy in Only Fools and Horses , we assumed we were wealthy and if the bank manager agreed, well, what the hell, I too will have a Mercedes in the garage and an investment property in Spain. Small wonder too that Gerry Adams has escaped the logjam of unionist obstructionism for the intoxicating lure of helping a society in which the political establishment has nothing, absolutely nothing, to offer. In the land of the blind, the one-eyed-man is king.
Go to ravaged Donegal, see the unemployment not experienced since the 1980s and see the loss of idealism, the loss of hope, the loss of sovereignty. It is, in short, a travesty.And yet there is hope.

At the height of the banking crisis, when the Irish economy was merely a glint in a self-serving economist’s eye, I wrote in The Irish Times that the enormity of the crisis could only be grasped when the Government released the full details of the PricewaterhouseCoopers report into the health of all of the banks, not just the redacted version of the Anglo Irish results, given the fact that the stress test was obviously applied uniformly. The piece (Government Must Reveal All It Knows; Opinion and Analysis, February 23rd, 2009) set out what was required. Rather than responding, the Government stonewalled and subsequent debate took place in a vacuum. I stepped back from further engagement. What was the point?

It was telling that in a subsequent visit to Dublin, more people – substantially more, by a margin of 800 to 1 – attended a Four Angry Men event, a commercialisation of Irish abject failure, than attended the fourth reading in the Oireachtas of the National Asset Management Agency Bill. The reading was witnessed only by myself, a pensioner, either escaping a cold winter night or the sole sentient being in the polity, and The Irish Times sketch writer. The success of the recent Kilkenny economics-comedy festival demonstrates the triumph of triviality over substance. The decision by RTÉ to privilege comedy over the most serious crisis facing the State in the most recent edition of the Late Late Show only adds to the catastrophic decline in values.
Jokes do not analysis make, nor does righteous or self-righteous anger, which merely reflects their own failure. Blaming Bertie may provide a scapegoat but also reflect media complicity or ignorance. As a former investigative journalist, I don’t know which is a more serious charge
We are, deservedly so, a global laughing stock, and watching serious journalists playing for (ironic) laughs is, quite frankly, obscene. And yet, despite global scepticism about the failure of the Washington consensus, the arrival of the IMF offers Ireland a unique opportunity to redeem itself. It offers the polity an opportunity to engage with outsiders, to force a new political compact based on transparency, accountability and responsibility. In so doing it can create a renewed social compact, which in itself could re-legitimise the IMF.
It is illegitimate for this present Government to clothe itself in international legitimacy.
Its failure to present the truth, the awful truth that entitlement to speculative and undeserved wealth informed societal obligation, has pauperised the nation.
We in Ireland often point to our literary heritage. It is, perhaps, not surprising that this rich heritage be flung back at us, most recently by the influential Lex column in the Financial Times.

“Time and time again, like Christy Mahon, the dissembling hero of Synge’s play, The Playboy of the Western World, Ireland’s banks have gulled investors and the Government into their back story. And so far, like Mahon, they have got off scot free,” wrote Lex.

The time for playacting has come and gone. It is time to grow up.
Justin O’Brien is professor of corporate law at the University of New South Wales, Sydney.

Cronies on the board

The calibre of State boards and the manner in which appointments are made have undermined their effectiveness and damaged public confidence. During their long years in opposition, both Fine Gael and Labour promised to end the practice of loading State agencies with political appointees and ensure they were fit for purpose. Unfortunately, they have not delivered. Initially, it appeared the Government was serious about this aspect of reform.

Advertisements seeking expressions of interest from suitably qualified candidates for positions on various State boards were published for the first time. Minister of State Brian Hayes spoke of a new departure and declared it was essential to do away with the culture of secrecy that had surrounded decision-making in public life. But it appeared that the culture of cronyism had become too ingrained. Party political appointments began to be made. The practice continues.

Corporate Governance pre-Crash (PD, FF, GP) = Corporate Governance post-Crash (FG/Lab)

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“The Irish Economy website, which began with such promise, has degenerated into ad hominem rants and self-congratulatory self-promotion.”

Really? Depends, I suppose. (pssst: does he know about that TASC site?)

Taking the piece in the round (its good stuff) I would opine that contributors to this site have, in the past, made each of the critiques stated by O’Brien. Where I might diverge from him is, that despite all the opportunities to sup at the well, Irish politicians will baulk at any meaningful political restructuring. They lack imagination, moral fiber and any smidgen of political courage. “Its my constituents, silly!” “Just don’t ask me about the salary, the allowances, and the pension/s – there’s a good chap!”

The Irish political establishment is a self-serving monolith. Only a foolish hero or a demented genius would attempt to take it on. It will have to be left to the voters to demolish it. In the meantime … … where’s Dork by the way?

Please bear in mind the Irish Times piece quoted above was published on November 24, 2010 just as the bailout we were assured we never needed was consummated.

I recall I was in New York at the time and the tone reflected an acute sense of embarrassment at my own identity.

What I am really interested in exploring in the lecture next week is what we can learn from history, the importance of paradigm shifts and, critically, the interaction between mandate, process and agency (i.e. the use of discretion to facilitate behavioral change).

It is in this regards that attention should be paid to Landis and his determination of the legitimacy of state intervention to guide industry practice (a view discounted by the elevation of the preposterous efficient market hypothesis) .

The advantages and dangers of commitment to voluntary codes of conduct (now accepted as necessary by the British Banking Association in relation to the LIBOR scandal) will be explored in the lecture precisely because they informed the debates over the creation and management of the Securities Act (1933) and the Securities Exchange Act (1934).

The critical takeaway point is that we are now at a paradigmatic tipping point which risks being squandered. Let us ensure that this time it is indeed different? What matters is not the exuberance (a baleful unchanging reality) but the response.

I look forward to engaging with you all in Ireland next week.

Regards, from a decidedly chilly Boston,

I think the expectations that certain people had of what the IMF could do in 2010 were very optimistic and that a review of the last 2 years or so would show a lot of drag.


No time to read the link right now, but was it because the idea of the state guaranteeing all the post bubble bank liabilities was not very clever, and the suggested follow-up of “just kidding”, unrealistic?

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