Don´t kill the eurozone dream just because bank regulators failed
Sir, Martin Sandbu is absolutely correct when in “Forget break-up: it just needs more parental love” april 3 he writes “It is not the euro’s fault that investors, policy makers and academics failed to spot the dangers”, though one of the current problems is that at most policy makers and academics do not want to acknowledge that.
When Sandbu writes about crazy capital flow that threw money at American house-buyers with no income or Icelandic banks with no experience or European sovereigns – he is referring precisely to those sectors which were subsidized by bank regulators, because their perceived risk of default was low. Had the bank regulators required the banks to hold as much capital/equity when lending to these as they required the banks to hold when lending to small business and entrepreneurs, some other crisis might have happen, but definitely not this one and definitely not one as large.
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