John Kay on Regulatory Capture

John Kay’s rightly notes that a regulator who regulates from the position of a distant judge is better placed to avoid regulatory capture. This reminds me of the advice that Lester Bangs gives to William in the movie ‘Almost Famous’. Bangs insists that a rock journalist ”cannot make friends with the rock stars” if he is to remain unbiased and true to his profession. Regulatory capture is good for the regulated in the short run but it is fatal in the long run. Eventually, cronyism kills the crony as well as the system. Again, Lester Bangs’ advice is as relevant to financial regulation as it is to rock journalism when he says: “ I know you think those guys are your friends. You wanna be a true friend to them? Be honest, and unmerciful.”