October 21, 2015

In banking, by means of its regulations, the governments are the biggest receivers of crony capitalism gifts.

Sir, I fully agree with Martyn Roetter in that “An honest economics profession should help defend against crony capitalism, not act as an apologist by obfuscating its reality and denying its existence.” “Fighting the cronies calls for honest economists” October 21.

And when looking for the crony relations in banking, all you need to do is to follow that which has been awarded the regulatory blessing of lesser capital requirements. Clearly, since that would be the sovereign, awarded an amazing zero percent risk weight, the governments are de facto in that sector, the biggest exponents and beneficiaries of crony capitalism.

Requiring more bank capital for some exposures than for other clearly distorts the allocation of bank credit to the real economy. And so an honest economics profession should also be denouncing that… but most economists keep mum on it… perhaps because they do not even understand it.

Financial Times, for unexplained reasons, has been extremely reluctant to report on such crony bank regulatory relations… would this be crony journalism going hand in hand with crony capitalism? 

@PerKurowski ©