Substance over form, finally!

Following early statements by Gordon Brown on the need for proper financial regulation, Secretary Geithner has finally decided that economic substance should supersede form in financial regulation

To that end, Mr. Geithner said: “Financial products and institutions should be regulated for the economic function they provide and the risks they present, not the legal form they take,” Mr. Geithner said. “We can’t allow institutions to cherry pick among competing regulators, and shift risk to where it faces the lowest standards and constraints.”

His full statement is available here.

Now, if only an Islamic jurist would say the same... Oh, wait a second, they have been saying that for centuries, including ibn Qayim in I`lam al-Muwaqi`in and the Ottoman Empire's jurists in Majallat al-Ahkam al-`Adliyya. The problem is not about rhetoric, but practice and implementation. I hope for everyone's sake that "substance above form" will become the practice in all financial circles.