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Friday, July 23, 2010

Where the Bureaucrats Roam

Oh, dear, Stephen Harper isn't even a good statist:

The Harper government is prepared to bypass Toronto as the headquarters of its proposed national stock market watchdog even though the city is the country’s financial centre, sources say.

The latest public blueprint for the national securities regulator, to be made public Tuesday, dodges the question of where the headquarters will be located, according to government officials.

But business sources say the Ontario government, which has staked its support for the new regulatory system on the possibility of putting the head office in Toronto, is going to be disappointed when — and if — the new agency takes shape.


Asked about this in the Commons in May, Prime Minister Stephen Harper was blunt. “As an Albertan, I have no interest in seeing this sector centralized in Toronto,” he told MPs.

Ahem, it already is centralized in Toronto. Has been since Montreal imploded in the mid-1970s. Not putting the headquarters of the new stock market "watchdog" in Toronto, or Ottawa, is like putting the Ministry of Oceans and Fisheries in Saskatoon. The American Securities and Exchange Commission (SEC) has its HQ in Washington, but the planned Canadian Securities Regulatory Authority (CSRA) would have a decentralized structure, with offices in Toronto, Vancouver, Montreal and Calgary. So it's a national regulator, without a national HQ, not even in the national capital. This certainly makes vote pandering sense, but its sheer absurdity should make it a perfect target for attacks from the Opposition. But this is too much to expect from Lord Iggy and the Gritettes. 

The proposed CSRA, essentially a super sized version of the already obnoxious Ontario Securities Commission (OSC), puts us rabid free marketers in a bit of quandary: Is it better to be ruled by one great busybody or by ten? To have one's rights trampled and privacy invaded by a great absurdity, or many smaller ones. 

Supporting the Great One approach to rights infringement is the argument from simplicity. One set of rules - however arbitrary - are better than many sets of rules. Contra is the argument from diversity, the more bureaucrats the greater the confusion for everyone, including the bureaucrats. It might also stir some regulatory competition, different jurisdictions vying for business by being less irrational in their demands. 

While I'm leaning toward diversity over unity on this one, it does have its pitfalls. Sometimes regulatory competition sinks to the level where the government doesn't even bothering doing what it is suppose to be doing. Case in point, the history of the old Vancouver Stock Exchange, whose listings included some of the highest flying gamblers since Icarus. A lot of the stock promotion in Lotusland went past the usual blue-skying and into genuine fraud. The guilty never seemed to get caught though. There was also the VSE's laughable "administration." Take this classic case:

In January 1982 the index was initialized at 1000 and subsequently updated and truncated to three decimal places on each trade. This was done about 3000 times a day. The accumulated truncations led to an erroneous loss of around 25 points per month. Over the weekend of November 25-28 1983, the error was corrected, raising the value of the index from its Friday closing figure of 524.811 to 1098.892 

Ouch. Imagine a mutual fund misstating its unit price for nearly two years. Big government is bad. No government can be worse.

Posted by Richard Anderson on July 23, 2010 | Permalink


Big government is bad. No government can be worse.

How about eleven big governments?

Posted by: Shane Matthews | 2010-07-23 6:07:47 AM

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