The financial crisis 2007-08 should have dealt a fatal blow to bank regulations, not to economic liberalism.

Sir, Sir Samuel Brittan in “It is no time to give up on economic liberalization” December 21, writes about “the traumatic event… the financial crisis… 2007-08 administered a fatal blow to economic liberalism”. 

That is only because the amazingly distortive role of bank regulations in generating this crisis has been completely ignored, or silenced. If not, the financial crisis of 2007-08 would not have even remotely signified a fatal blow to economic liberalism, but would indeed have dealt a fatal blow to the crazy regulatory paradigms used by some overly wimpy bank regulators. 

The Basel Committee, primarily with Basel II, imposed on the banks capital requirements based on perceived risks which were already cleared for by the banks and the markets, and completely distorted the financial system. 

As a consequence banks were allowed to earn a much higher expected risk-adjusted return lending to “The Infallible” than when lending to “The Risky”. And, as anyone should be able to understand, at least if allowed to understand it or no other agenda stands in their way, that has absolutely nothing to do with the free markets that economic liberalism promotes.