Joe Stiglitz in the FT says:
Countries that proceed [to protect their own citizens with strong domestic regulation] will face threats of the kind already received – a rapid departure offshore. But the parts of the financial system critical to the real economy – those, for example, that lend to businesses – are not so footloose. Any cost-benefit analysis of the loss of the gambling casinos offshore would surely conclude that if some other government wants to risk economic instability and big bills for bail-outs to its taxpayers, so be it – our task is simply to prevent contagion from these under-regulated jurisdictions. No country can fully insulate itself, but the best protection is a good regulatory structure at home. The continuing instability in global financial markets should have made it clear that we need that now.
As usual, he’s right.