My one and only question to Ben Bernanke in the Congress of the Home of the Brave

Sir I refer to Bernanke’s recent declarations as reported by Robin Harding.

If I had a chance to direct only one question to Mr. Bernanke, in front of the Congress of the Home of the Brave, that would be:

Mr. Bernanke how long do you think a nation can remain strong with banks that avoid what is perceived as risky?

And, if he asked me what the hell I meant with that, this is what I would explain to him about banks.

Sir, banks are currently allowed to hold less capital when lending to “The Infallible”, like the Treasury and the AAAristocracy, than when lending to “The Risky”, like the small and medium businesses and entrepreneurs.

And that translates in “The Infallible” being able to produce banks higher expected risk-adjusted returns on their equity than “The Risky”. And that of course makes access to bank credit by “The Risky” much scarcer and more expensive. 

And I ask of course because “The Risky” are those who operate on the margin of the real economy, those who keep the economy moving forward, generating jobs and assuring the existence of some of “The Infallible” tomorrow.

PS. And besides Mr, Bernanke, for your information, "The Risky", precisely because they are perceived as risky, have never ever caused a major bank crises. That honor corresponds entirely to some of The Infallible who turned out not to be, 

More toughness is needed in Basel in order to get bankers moving instead of the Congress.

Sir I much appreciated Peter Thal Larsen’s “Withdrawal unavailable” December 6. At long last someone has given enough importance to how minimum capital requirements imposed by the Basel Committee is a constrain on new banking business, among other because they force the banks first to dry up any already spilled milk. Official efforts to get the bank credit moving should of course start with introducing modifications of those capital requirements, unfortunately our so risk adverse regulator wimps do not even dare to enter that terrain. When the going gets tough we need to call in the tough!

Instead of having a Congress requests such ridiculous things like the senior management of the automotive industry driving to Washington in order to access new credit, the Congress should be asking the banks about what they would need to start putting that kind of automotive risk on their books again.

Finally, when Thal Larsen quotes Robert Self of Credit Suisse saying that the appetite for yields drove a lot of demand for mortgage backed securities, this is just not so. The yields themselves were nothing to write home about and the risk-reward ratio was deemed to be attractive only because these securities had triple-A ratings. Without these ratings no one, and I mean no one, would have purchased these securities. Moreover without those triple-A ratings we would not even be in this crisis.