It was the absence of effective US regulation or, in the case of credit default swaps in which AIG was such an active player, no regulation at all that made the financial mess not only possible but (I would argue) inevitable.It was prudential/solvency regulation of financial institutions at which Canada through OSFI and the Bank of Canada has been so effective.
One is in a different regulatory arena when what is at issue is what is loosely referred to as market conduct regulation, i.e., what companies and individual sales people do in the market place and the extent to which it is regulated [more about this in my next post to this RickardsRead blog: No.31 "Will 'selling of stuff' be strangled?"].
Not all financial regulation is of equal worth. As an example consider Ottawa's regulatory overkill involving detailed and highly prescriptive anti-money laundering regulation of dubious practical value and an expensive burden on financial institutions and their sales people and therefore on consumers who ultimately pay its costs. Privately many in financial companies will agree with what I have just stated but publicly must, like their organizations, bow before this (now) officially designated icon of financial regulation however unlikely it is -- for example -- that the burdening of Canadian life insurance agents with minutiae of anti-money laundering regulation will interfere with international 'terrorists'.
The US-driven anti-money laundering regime imposed upon Canadian financial institutions and their marketplace activity may complicate the 'business lives' of the Tony Sopranos of the crime world. However the idea that post-9/11 terrorists in order to be a threat to the US or Canada need to be able to 'launder' gobs of money rather than to have what they still possess (i.e., hidden access to relatively small amounts of needed cash from various sources) is not merely dubious but distinct from reality.
Ottawa went along with all this terrorist-related stuff to try to please the post-9/11 US government mentality, as we have been forced to do in other areas affecting what the U.S. government believes is American 'security' . They are addicted to the idea that Canada is a weak link as illustrated once again when President Obama's Secretary of Homeland Security actually repeated in a recent interview with the CBC the longstanding American myth that some of the 9/11 hijackers entered the US from Canada. (She later retracted it).
I think Canadians should be about as reassured on the security front by this sort of new anti-money laundering regulation as by their being forced to take their belts and shoes off as part of airport passenger security screening while unscreened cargo is being loaded into the belly of the aircraft they will shortly board. In a major airport like Toronto's Pearson where, as Senator Colin Kenney's investigations have shown, a significant number of persons with criminal records work and there is unattended access to the airport's supposedly secure areas.
The benefit to Canadians' security of the anti-money laundering regulation (like ostentatious but retiform airport screening) is likely to be arise more in the area of psychological reassurance than in the genuine enhancement of their physical safety.