July 08, 2009

“Small children small problems big children big problems”

Sir John Kay in “Our banks are beyond the control of mere mortals” July 8 discussing the qualifications of those in charge of our financial institutions concludes that “we would be wiser to look for a simpler world, more resilient to human error and the inevitable misjudgements”. I guess anyone except those puritans who expect our bankers to be from another world would tend to agree with that.

Nonetheless given that the world is not simple and that we should perhaps not want it to be simple either, the best we can hope for is first for no one to accumulate so much power that the results of any inevitable misjudgment will bring the system done; and second that the resilience to human errors does not hide the human errors while they are still small. In other words exactly what the very unwise regulators did when they invested so much regulatory power in the three amigos, the credit rating agencies.