Current bank regulators not only do not know what they are doing, they even double down on their ignorance

Sir, Robert Lenzner writes “Seven years after the worst crash since 1929, the alarming fact is that financial regulators still know next to nothing about the true level of risk that big banks are exposed to”, “Hidden dangers that banking regulators cannot understand”, April 21.

Of course they don’t, and I have been telling you so in more than 1.800 letters over the last decade. Any regulator who sets the equity requirements for banks based on the risk of their assets, and not based on the risks that have always caused the banks to fail, has no idea about what he is doing.

And any regulator who allows banks to leverage differently for different assets, and thereby distorts the allocation of bank credit to the real economy, is only doubling down on his ignorance.

@PerKurowski