Financial Side Effects
If we measure the quality of a newspaper by the wackiness of the letters sent to its editors, the Financial Times would probably come on top. Recently Mr Mike Standing and Mr Hanno Ronte wrote to suggest a way of preventing future financial crises — test new financial products like we test new drugs:
“Sir, The emergence and widespread use of new and complex financial service products are an important driver of the financial crisis. In order to help prevent a recurrence of the problems around many of these products, financial regulators could learn from the experience of the US Food and Drug Administration and their drug approval process. A comprehensive testing, evaluation and approval process to assess the benefits and risks of new financial products would make an important contribution to ensuring financial stability.” (from “Test new financial products like drugs”, Financial Times, October 22 2008)
Great thought… what could it possibly mean? If we were to regulate financial products like we do pharmaceuticals, what would a clinical trial look like? Could we recall a product from the market in the same way we can recall drugs? That would require labels, barcodes, devices to mechanically read them… Could we perhaps develop animal models — or their equivalent — to try things out before we release the stuff out there? How would we go about monitoring for side effects? The answer: in a future letter to the editor.