The mission statement for our banks as decreed by its regulators does not make any sense.

Sir, Sebastian Mallaby writes: “Banks are underwritten by taxpayers via deposit insurance as well as the too-big-to-fail safety net; they need to be reined in, and if they shrink, so be it”, “Stringent rules for hedge funds make the financial system fragile” November 17.

Indeed but, why are banks underwritten by taxpayers? What are banks supposed to deliver in return?

The current mission statement imposed by regulators on banks, by means of credit risk weighted capital requirements, seems to be that of lending more and cheaper than normal to all those perceived as “absolutely safe”, and to stay away from lending to the “risky”. Is that what we want? I don’t think so. If it were, there would be no reason for us to underwrite anything.

For example the: “We the people underwrite the banks so that these can lend more and cheaper to our "infallible" sovereigns… in the hope that doing so we don’t have to pay taxes”… sounds more like underwriting the sovereign than underwriting the banks.

No, I believe we taxpayers agreed on underwriting the banks so that these would be better equipped to take on the risks of lending to all those risky small business and entrepreneurs we all know should get credit, so that the economy grows and as a result we all are better off. That was the quid pro quo!

And Mallaby also writes: “Regulators need to remember that financial risk will not go away… there will be difficult judgments about how capital should be allocated. So there has to be a theory of where this risk can best be housed. If hedge funds are part of the answer, regulators make the world less safe by clamping down on them.”

Absolutely, if not the banks, then who is going to house the risk-taking we support and that most of the world, not understanding the regulations, still think is housed in the banks?