Give the banks some time to adjust

Sir currently when financial assets like the bonds collateralized with subprime mortgages suffer a downgrading by the credit rating agencies, a bank, according to the minimum capital requirements, has to come up with new capital in the case he did not have more capital than needed. When downgradings become epidemic, as currently is the case, this might force such a scramble for bank capital that it could make matters worse.

Again, many downgradings are really not about the assets turning sour but more about discovering that they always were and so really the capital should have been there from the very start, and if so why the rush to now fix it all immediately if the rushing might turn into panic?

In this respect I would suggest that our bank regulators start thinking about giving the banks some time to adjust their capital base, for instance by giving them at least one year to come up with more capital for any asset that is suffering epidemic downgradings.

Why should bank regulators be so lenient? Well for a starter they were the ones who got us into this mess with their minimum capital requirements adjusted to risk invention and with their appointment of the credit rating agencies as their financial commissars.