Economist demands City avoid moral hazard like insurers do
Influential economist Willem Buiter has called for all financial products such as derivatives and short-selling, to be regulated to the same standards as the insurances industry requiring players to own shares they want to sell for example, for example, instead of borrowing them.
Willem Buiter is professor of European political economy at the London School of Economics and Political Science, is former chief economist of the European Bank for Reconstruction and Development, former external member of the Bank of England’s Monetary Policy Committee.
In a lengthy essay on his FT blog, he explains:
- why insurance was separated from gambling
- about moral hazard
- how the credit default swaps that brought down AIG should not be permitted applying Shariah law to financial services
