Contrary to Gordon Brown, current bank regulators do not dare to take questions, they might not be able to answer

Sir, as truly responsible elite should behave, Lucy Kellaway takes society at task with her “There is nothing cute about innumeracy” May 8.

In it Kellaway refers to how a kid, almost 20 years ago, asked Gordon Brown, then Chancellor of the Exchequer, “what is 13 squared?” and got a correct answer.

I argue that the current risk weighted capital requirements for banks are dangerously nonsensical, and that is why I have been asking bank regulators many questions about these, during about 20 years too. I have not had that kid’s luck.

For instance, when I ask why they give what is AAA rated, that we know banks could be building up dangerous exposures to, a risk weight of only 20%, while the so innocuous below BB-, that which bankers would not touch with a ten foot pole, is handed a 150%, their eyes go blank, and they nod to each other either “what the hell is he talking about?” or “does he not understand that risky is risky and safe is safe?”

If I ask them how much they feel authorized to distort the allocation of bank credit to the real economy in pursue of an elusive financial stability, then they ignore me completely.

Frankly, how can a society allow its banks to be regulated by those that, knowing as they should that bank capital is to be there to cover for the unexpected, are so dumb so as to base their capital requirements on what’s expected?

Here follows a link to some of my many questions that have never received an answer.

http://subprimeregulations.blogspot.com/2016/12/must-one-go-on-hunger-strike-to-have.html

How is it that “Without fear” FT, contrary to that young kid who asked Gordon Brown, does not dare to ask bank regulators these questions?

@PerKurowski

Gordon Brown, in order to defend globalization, you need to stand up against dumb rulers of it, like the Basel Committee

Sir, Gordon Brown writes: “Leaders must make the case for globalisation” July 17. Absolutely, but in the same vein, leaders must make the case against dumb globalization, and nothing so dumb has been globalized as the pillar of the Basel Committee’s regulations, the risk weighted capital requirements for banks.

Sir, what’s more to say, you clearly do not agree with my assessment, or there is some other factor in play. Anyhow, I refer you again to a brief memo on what I consider to be so mind-blowing wrong.

PS. I just discovered a Deutsche Bundesbank paper in which they now try to deduct from research some self-evident conclusions. 

@PerKurowski

The quality of its unemployed is also vital for the strength of a nation

Sir, Janan Ganesh refers to the relative political tranquility that has prevailed in Britain over the last years, even in the face of 21 percent unemployment among young people, and other hardships resulting from the current crisis/recession, “The British have met crisis with understatement”, November 19.

That is of course extremely valuable and commendable, as long as it is of course much more the result of stiff upper lips, than of a feeling of resignation or sheer apathy, especially in coming generations.

In June 2012 in an Op-Ed I wrote “The power of a nation, and the productivity of its economy, which so far has depended primarily on the quality of its employees may, in the future, also depend on the quality of its unemployed, at least in the sense of these not interrupting those working.”

The conventionals scorched the earth but still reign!

Sir again Martin Wolf in “The economic legacy of Mr Brown” May 14 refers to a “light touch” [financial] regulatory regime. I object, never before has there been such a heavy handed intervention as when the regulators created huge incentives, by means of ridiculous low capital requirements, to lend to anything related to a triple-A, and in effect subsidizing risk adverseness to such an extent that markets followed fake-triple-As into disaster.

Also Martin Wolf repeats several times the correct assessment that one of Mr. Brown’s faults was to follow too much the conventional wisdom. Not only do I find it difficult to put what happened in relation to any “wisdom” but I also believe it would have been more elegant for Wolf to acknowledge that, from his own high pedestal in the Financial Times, he himself has been an important feeder of those conventions.

The worst though is that, with or without Mr Brown, the conventionals still reign... suffices to see how the Financial Stability Board is digging us even deeper in the hole.

My timely warning about Jo!

Sir, as the final book of the Harry Potter is about o be released, just in case anything dark happens, let me remind you all that at least I did my civic duty by including the following warning in my book Voice and Noise in 2006.

“As the books about Harry Potter have meant so much for the upcoming generation and sometimes they even represent the only books it has read, there can be no doubt that the last Potter instalment can actually seal this world’s fate for a long time to come. J. K. Rowlings, or Jo as we are instructed to call her in her Web page, is someone to watch, very closely. Not that I distrust her, but we should perhaps think about censoring her (discreetly). What will be the lessons she will imprint on her young and not so young and even quite old (like me) readers’ minds with her final book? What if she goes haywire? I guess I’ll manage it, I hope, but will the young ones?”