Money, money, money

Blog

Investment and the sub-prime crisis aren’t normally topics for my blog – but recently two pieces, one in the Times and the other in the FT caught my eye.

On the one hand you have the always entertaining Jonathan Guthrie in the FT. He points out that the sub prime crisis is leading to an inevitable bonanza for litigators. In the US this has already begun in earnest, and Guthrie suggests it will soon start in the UK.

As he memorably puts it ‘Rating agencies must feel as vulnerable as a nude gymnast performing squat jumps in a porcupine farm’. If the US model is anything to go by they have reason to be nervous, as pension firms sue ratings agencies for diminution of share value.

In the Times Jamie Whyte, author of Bad Thoughts: A Guide to Clear Thinking, says that the idea that, in the light of the sub-prime experience, we should regulate to protect investors from bad advice and bad investment is tantamount to arguing that because we should regulate romantic relationships to reduce the possibility of people being jilted.

For Whyte the very idea of regulation in an area of free choice is problematic; ‘Once risks are known, regulating them is worse than useless. It can only move the price of risk away from, and usually above, the market price. It encourages financiers and investors to seek profit in areas where the regulators are not imposing their burdens – namely those where the risk are poorly understood’

Now, Guthrie is not advocating litigation merely predicting it, and litigation is not exactly the same as regulation (although if successful litigation establishes case law it will tend to have a similar impact to liability imposed by regulation). But these articles point to two different views of the rights of the consumer or investor.

Whyte relies on the principle of caveat emptor, while Guthrie suggests that people who have taken bad advice will naturally seek redress against those who gave them the advice.

The RSA’s Tomorrow’s Investor will be exploring just this dilemma. We will expose a selected group of small and ‘indirect’ investors to a comprehensive picture of how decisions are made about ‘their’ money. We will explore how sound are these decisions and also their ethical dimension.

At the end of the forum the question is whether, when the investors have these insights, it makes them want be more active, to have better protecting or more effective intermediaries. I’ll make sure we send Jonathan and Jamie our findings.

Be the first to write a comment

0 Comments

Please login to post a comment or reply

Don't have an account? Click here to register.

Related articles

  • RSA Catalyst Awards 2022: Round two winners announced

    Beth D'Elia

    Announcing the eight innovation projects receiving RSA Catalyst funding in round two of 2022's awards.

  • Recognising reciprocity

    Al Mathers

    Al Mathers, former RSA Director of Research and Learning, explores the importance of introducing reciprocity into the work of social change organisations like the RSA.

  • Super-nature: shaping how cities feel

    Tamsin Hanke Sash Scott

    Super-nature was one of 10 commissions to feature in the 2022 global exploration research project, Collective Futures. Learn about the work and its outputs in this field note.