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Former FSA director defends fair value

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16th Jan 2009
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Politicians have made fair value accounting a scapegoat for the credit crunch, claimed Oonagh McDonald in today’s Financial Times.

The former director of the Financial Services Authority (FSA) argued critics “clearly do not understand the operations of the market”.

Now that parts of Westminster had finally woken up to the usually dry and dusty world of financial reporting standards, McDonald said the real danger was interference by democratically accountable members of parliament. Refuting the idea that fair value accounting had contributed to market instability or problems of liquidity, she then advanced the notions that “politicians’ misunderstandings may be deliberate” and that any reformation of the rule would only serve “to cover up the extent of the problem.”

McDonald joined the ranks of Sir David Tweedie and Paul Boyle (now resigned) in attributing the economic crisis solely to bad lending by the banks.

McDonald was formerly a director of the Securities and Investments Board (SIB) which was created in 1985, which was renamed as the FSA by then-chancellor Gordon Brown in 1997.

“The FSA considers financial reporting a matter for the Financial Reporting Council (FRC),” the spokesperson added.

Oonagh McDonald is a former philosophy lecturer with a degree in theology.

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By J Lessels
18th Feb 2009 15:58

Democratic Interference
The FSA are clearly up to their necks in responsibility for the mess we are in. For someone from the FSA to say their critics do not understand is chutzpah gone mad.

Whilst the FSA may not understand what they have been paid to do, I can certainly tell her that it is the job of democratically elected MPs to interfere in the cosy world of bankers and regulators. It is only unfortunate that they didn't interfere before.

There are those whose ideological commitment to free markets (even now) is such that they object to any involvement by democratically elected representatives. These interfering democratically accountable MPs are speaking for us taxpayers who are have assumed responsibility for the banks debts.

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By evanowen
16th Jan 2009 16:30

FSA (nee SIB)
I think you will find that Oonagh was a director of the incorporated entity the Securities and Investments Board (SIB) which was created in 1985 and renamed by Gordon Brown as the Financial Services Authority (FSA) in 1997.

If she is indeed a former director then the FSA spokesperson is clearly in need of a history lesson, as are many of his/her colleagues when someone asks why the likes of Equitable Life slipped under their radar.

When you think that this regulator has been.. er.. well.. 'regulating' for well over two decades and yet our financial world is falling down all around us you have to wonder why it was created in the first place and whether it should be written off as a bad job before it does any more damage.

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