Mortgage regulation has changed how we do business but even the most ardent of its supporters can’t dispute it has complicated matters.
While it’s true that regulation has put in place a raft of measures designed to protect the interests of consumers, it has come at a huge cost – not just in cash terms but also in relation to its impact on clarity.
When we survey the wreckage caused by the liquidity crisis it’s sometimes difficult to discern the value of all this change. It must seem to the public that regulation is more concerned with minutiae than substance.
Whether seeking investments or mortgages, poor punters get inundated with more paper than they can shake a stick at. And the plethora of reading material, often couched in the jargon of the industry, can be incomprehensible to the untrained eye.
So what happens? The decimation of the rainforests that provide the paper impairs the world’s lungs but fails to en-gage consumers’ brains.
There was a time when we would have been encouraged to read the small print, but now all the print is so small the problem is where to start. And because the chore of reading the documentation is so arduous, customers don’t bother. But this doesn’t matter, because the assumption is that in a financial services industry controlled by regulators paid to look after the public interest, punters are protected whether they read the stuff or not.
The financial cost of this protection is considerable. It can be seen in the spiralling wage bills of every regulated industry, as increasing numbers of specially trained staff are recruited to comply with the requirements of the regulatory thought police. It has also had an effect on product pricing and administration charges, which in turn are passed onto borrowers. After all, there’s no such thing as a free lunch.
So here we are, surrounded by bureaucracy. We’re paying a premium for a system of protection that we can’t understand but which doesn’t stop the management of a major bank like Northern Rock playing fast and loose with our money and investing it in assets so risky that shareholders are set to lose their shirts. Doesn’t this strike anyone as odd?
Regrettably, we’ve become a nation so obsessed with protection that we’ve lost our sense of perspective. Of course it’s sensible to protect the public, but wouldn’t it be more sensible to sort out the corporate lunacy that has put the world economy at risk?