July 13, 2018

When it comes to recklessness, the whizz-kids are small fry when compared to current bank regulators

Sir, Gillian Tett, referring to “the 2008 financial crisis writes: “Regulators were largely toothless because the whizz kids were creating financial instruments that straddled national borders, regulatory silos and outdated laws” “Cambridge Analytica scandal echoes the financial crisis” July 13.

Hold it there! If the regulators were “toothless”, what on earth were they doing regulating in the first place?

And, really, how much damage could reckless whizz kids have caused, if regulators had not, for instance allowed banks to leverage their capital with securities backed with mortgages to the subprime sector, 62.5 times, only because a human fallible credit rating agency had assigned that instrument an AAA to AA rating?

And what whizz kids have ever been involved with something as reckless as when regulators assigned a risk weight of 0% to sovereigns like Greece?

If we take this all to the issue of misuse of data, what are we to say about regulators who seem to keep a low profile on the fact that whatever data Cambridge Analytica laid there hands on, that was nothing when compared to the so much more extensive data social media, like Facebook, already possess. Could these regulators, in a Basel Committee for Data Supervision, really be crafting adequate policy responses that will not have serious “unexpected” consequences?

What if that data had now to be shared with governments, would that not make any autocrats’ “Big-Brother is Watching You” wet dreams come true?