Those who have no business interfering should not be allowed to use that a consequence was unintended as an excuse

Sir, Robin Wigglesworth writes: “Overlaying safeguards on an immensely complex financial system may have the unintended consequence of making it more intricate and therefore more fragile” "Regulators seek ways to stem fragility caused by hyper-fast trading", November 7.

Again there is that reference to “unintended consequence” which seems always ready to serve as an excuse for any kind of dumb and mindless interfering. An example:

Never have bank crises resulted from lending out too many umbrellas when it rained, they have all resulted from lending out too many umbrellas when the sun was shining radiantly.

But nevertheless bank regulators decided that, in order to make banks safe, they had to give them even more incentives to lend out the umbrella when the sun shines and to take it back hurriedly when it looked that it might rain. And so they imposed credit-risk weighted capital requirements for banks; more risk more capital – less risk less capital.

And of course the result was excessive bank exposures to what was perceived as safe, this time aggravated by banks holding specially little capital against it… was that an unexpected consequence?

And of course the result is excessive few bank exposures to what is perceived as risky, like SMEs and entrepreneurs, something very dangerous for the real economy… is that also an unintended consequence.

And then the regulators decided that a few human fallible credit rating agencies were going to decide on the riskiness of credits.

In January 2003, in a letter published in the Financial Times I wrote: “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic errors, about to be propagated at modern speeds”

And yet many present the ensuing disaster with the AAA rated securities backed with mortgages to the subprime sector in the US as an “unintended consequence”. Have they no shame? Are we so dumb we allow them to get away with that?

@PerKurowski ©