The Basel Committee for Banking Supervision is the stupidest and most failed oracle of our times

Dan McCrum writes about predictions, “How to grab hold of the conversation with a bold prediction” December 16.

Sir, I just want to notice, for the record, for the umpteenth time, that the risk weighted capital requirements for banks, more risk more capital – less risk less capital, are de facto a prediction by the regulators based on what they believe is the most dangerous for our banking system.

As is, from their desks, they predicted that what is ex ante perceived as risky, is risky ex post. Clearly that must be one of the stupidest and senseless predictions of our times.

Anyone with the slightest understanding of what happens on Main Street, would know that what poses dangers to the banking system is unexpected events, like devaluations, criminal behavior, or excessive exposures to what was ex ante perceived as safe but that ex post turned out very risky.

Sir, I’m sorry but I have to ask, since you seem to have swallowed that prediction hook, line and sinker, has anyone in FT’s establishment ever walked on Main Street?

Sir, you doubt it? Then dare ask the regulators the following questions and observe their silence.

@PerKurowski

FT establishment, accept that getting rid of a bank regulation that decrees inequality would also help the worst off

Sir, Chris Giles argues that Mark Carney did not live up to his own admonition last week about that the time has come for frank talk about the downsides of globalisation “Frank talk, not warm words, will help the worst off” December 15.

Indeed, Mark Carney, besides being the governor of the Bank of England, is the current chair of the Financial Stability Board, and so presumably well versed in bank regulations. Nonetheless Carney has refused to be frank about the fact that the current risk weighted capital requirements for banks, distorts horrendously the allocation of bank credit to the real economy, hurting growth and job creation; and all this for no purpose at all as major bank crises are never caused by excessive exposures to something ex ante perceived as risky. That regulation de facto decrees inequality.

But with respect to that FT also decided to ignore my soon 2.500 letters sent over the last decade on the subject of “subprime banking regulations”. One of these days, when all truth about the risk weighing really unravels; FT will need to be frank on its reasons for silencing a voice of criticism.

PS. Here are some simple questions that the “without fear” FT establishment has not dared to ask the bank regulation establishment. Or might it be that the “without favour” part of FT’s motto has its exceptions.

@PerKurowski

Often unanswered emails speak much louder than those answered… as well as help to build a case.

Sir, I refer to Lucy Kellaway’s “My solution to the maddening silence of ignored emails” February 2.

You know that in my case I have thousand of unanswered emails of those I sent to the Financial Times and its journalists over the years. And most of these have to do with that regulatory asteroid that hit the earth in 1988, the Basel Accord, and that have ever since distorted the allocation of bank credit to our real economy.

Am I mad because of that? Absolutely not! Quite often unanswered emails speak much louder than those answered.

I know that my criticism and my warnings about what the Basel Committee is doing are based on realities, and so I just have to bide my time. When the truth finally comes out, FT’s silence merits a chapter of its own in the book that will result… and Sir, may I predict you will hope you had answered many more emails.

Meanwhile let me heed some of Kellaway’s advice: “There is no shame in pestering: in a world in which people have largely given up answering at all, it is moronic to ask only once. If the answer was always going to be no, nagging can’t make things worse. And there are enough people… who allocate their time not to those they want to see most but to those who persist longest.”

And my warnings were silenced by the FT establishment

Sir Dirk Bezemer, in “Why some economist could see it coming”, September 8, argues correctly that many did indeed see it coming but that “they were ignored by an establishment”. FT should know about that.

In February 2000 in the Daily Journal of Caracas, Venezuela, in an article titled “Kafka and global banking” I had written:

A diminished diversification of risk. No matter what bank regulators can invent to guarantee the diversification of risks in each individual bank, there is no doubt in my mind that less institutions means less baskets in which to put one’s eggs. One often reads that during the first four years of the 1930’s decade in the U.S.A., a total of 9,000 banks went under. One can easily ask what would have happened to the U.S.A. if there had been only one big bank at that time.

The risk of regulation. In the past there were many countries and many forms of regulation. Today, in Basel, norms and regulation are haughtily put into place that transcend borders and are applicable worldwide without considering that the after effects of any mistake could be explosive.

Excessive similitude. By trying to insure that all banks adopt the same rules and norms as established in Basel, we are also pushing them into coming ever closer and closer to each other in their way of conducting business. Unfortunately, however, nor are all countries the same, nor are all economies alike. This means that some countries and economies necessarily will end up with banking systems that do not adapt to their individual needs. http://bit.ly/HIi3x

And, in January 2003, the Financial Times published a letter I wrote and which ended with “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic error to be propagated at modern speeds. Friends, please consider that the world is tough enough as it is.” http://bit.ly/5i1Bu

But then, I was shut up by the Financial Times establishment, who had perhaps decided there were only some macro economic problems and not any problems resulting from bad financial regulations, and wanted to hear no monothematic contradictions on that.