July 02, 2016

But why do some, like Gillian Tett, insist on trusting some totally failed experts?

Sir, Gillian Tett writes on “Why we no longer trust the experts” July 2.

But one could also ask: “Why do some keep trusting totally failed expert?” or “Why are not experts questioned more?”

Those responsible for Basel I and II regulations, they allowed banks to leverage equity especially much with those assets perceived ex ante as safe, precisely those assets to which bank could create excessive exposures; and which could result very dangerous if ex post, as indeed happened, these assets turned out to be very risky, like the AAA rated securities and sovereigns like Greece.

And by imposing higher capital requirements on what was perceived as risky, like SMEs and entrepreneurs, they made it even harder than usual for these extremely important economic agents to access bank credit.

And yet, basically the same experts, using basically the same although much more complicated script, are allowed to keep on regulating with Basel III.

That would never happen in Hollywood or Bollywood after a major box-office flop.

Here is an aide memoire on the egregious mistakes of current bank regulations.

So why is it so hard for FT that so proudly announces a motto of “Without fear and without favour”, to shame the failed regulators, as they should be shamed. There is nothing o dangerous as experts not duly sanctioned. Frankly, from the looks of it, we should not trust many expert journalists either.

PS. I believe it is much more important to make sure our banks are regulated by adequate persons than picking a good restaurant… but perhaps some would disagree.

@PerKurowski ©