July 07, 2016

The access to bank credit manipulation costs us infinitely more than Libor and all other manipulations put together

Sir, Michael Skapinker, referencing a traders working conditions, gives a well reasoned and heartfelt explanation of why he feels sorry for at least one of those recently found responsible for manipulating the Libor rate. I sure hope it will be read before any sentencing, “The Libor trial and how to deal with a bullying, dishonest boss” July 7.

But let me add to that the following:

I am absolutely convinced that the risk weighted capital requirements for banks, introduced by the Basel Committee in 1988 signifies an outright manipulation of the access to bank credit. By favoring what is perceived, decreed or concocted as safe, like sovereigns, the AAArisktocracy and residential housing, these sectors have received way too much bank credit on way too easy terms. And, as a consequence, those perceived as risky, like SMEs and entrepreneurs, those upon much of the future economic growth and job creation depends, have received way too little credit, in way too harsh relative terms.

If we add the costs of having dangerously overpopulated safe havens like AAA rated securities and Greece, and around the world hindered millions of small loans to be given to those who most needed it, the costs of this distortion for the society are mind-blowing. These exceed thousand fold whatever damages might have been produced by all other recent manipulations put together.

And what has happened to the bank credit access manipulators? Absolutely nothing, in many ways they have even been promoted.

And what has happened to whistle blowers like me. Not much, except for having to suffer seeing my arguments ignored, while being sure this will affect negatively the future of my own constituency, my children and grandchildren; as well as the future of those of the baby-boomer generation about to retire.

The costs of a Libor manipulation, winners and losers, these net out.

The costs of distorting the access to bank credit do, medium and long term, only produce losers, and so they are boundless.

And even though all that access or bank credit manipulation implies absolutely no criminal act, I believe it was done unwittingly and with only good intentions, and only pure innocent stupidity prevailed, it sure help to put all other manipulations in a different perspective. 

@PerKurowski ©