July 13, 2011

The vicious communistic styled bank-regulatory circle

Sir, John Plender, in “Time for eurozone policymakers to grasp the nettle” July 13, makes reference to a “vicious circle [between government and banks] at the heart of the eurozone”.

It is the vicious communistic styled bank-regulatory circle that has been present before our eyes for many years, of which I have written so often about, but that all, you included, preferred to ignore. That circle goes like this:

“I, the Government, commit to give the credit rating agencies strong evidences that I will support you, the big banks, so that you, the big banks, can get good ratings and raise funds cheaply.

And I, the Regulator, commit to set zero or very low risk-weights so that you, the banks, do not need to hold capital when lending to the government… of course for as long as you allow us to keep our jobs.

And you, the big banks, you just do as the incentives and the disincentives tell you to do.

And so we, the Government, the big banks and the regulators will live forever happy… until the scheme collapses and citizens and taxpayers find out what we have been up to.”

The conclusion, Governments and communistic bank regulators de-facto conspired and colluded in order to have our bank savings nationalized.