And citizens could sue agencies for too good credit ratings of sovereigns, which caused governments to borrow too much.

Sir, I refer to Stephen Foley’s and Guy Dinmore’s “Italy eyes €234bn suit after ratings groups failed to value la dolce vita” February 5. It reminded me of an Op-Ed of September 2002 titled “The riskiness of country risk”.

In it I wrote: “What a nightmare it must be to be risk evaluator! Imagine trying to get some shuteye while lying awake in bed thinking that any moment one of those judges, those with the global reach that have a say in anything and everything, determinates that a country has become essentially bankrupt due to your mistake, and then drags you kicking and screaming before an International Court, accused of violating human rights.

What a difficult job to be a rater of sovereign creditworthiness! If they overdo it and underestimate the risk of a given country, the latter will most assuredly be inundated with fresh loans and will be leveraged to the hilt. The result will be a serious wave of adjustments sometime down the line. If on the contrary, they exaggerate the country’s risk level, it can only result in a reduction in the market value of the national debt, increasing interest expense and making access to international financial markets difficult. Any which way, either extreme will cause hunger and human misery.”

And so what’s more to say. If the Italian Government sues the credit rating agencies for having given Italy too bad ratings, an Italian citizen might equally sue these for having given Italy too good ratings

And after that, what about suing the regulator who with their risk-weighted capital requirements for banks multiplied immensely any signal emitted by the credit ratings?

To break Italy’s, Europe’s and America’s vicious circle, their current central bankers and regulators should resign.

Sir, Giulia Segreti and Guy Dinmore report that “Italy’s central bankers fears ‘vicious circle’” November 1. That is Italy’s Europe’s and America’s problem, that their central bankers are not even aware that they already find themselves in the most vicious financial circle ever, only because of their own bank regulatory doings. That vicious circle goes like this: 

It starts with regulators foolishly trying to avoid bank failures by allowing banks to hold less capital when lending to those perceived as less risky “The Infallible” than when lending to those perceived as “The Risky”. 

That signifies that “The Infallible” will have access to bank credit more generously, cheaper and in easier terms than what would otherwise have been the case. While likewise “The Risky” will have less access to bank credit, will have to pay higher interest and need to accept harsher terms. 

And that signifies that “The Infallible”, like the AAA rated, real estate sector and sovereigns (like Greece) little by little will over-borrow and turn into huge unmanageable risky assets, while “The Risky” like small businesses and entrepreneurs will not be financed, and so there will be little of the new sturdy economic growth, and jobs, they can help to provide. 

And when it explodes there will be less and less safe havens were banks, because of the lack of equity, need to take refuge… and we all know what happens to a safe haven when it gets to be overpopulated. 

So if central banker fears a vicious circle, perhaps the best they can do to break it, is to resign and let a new generation of regulators take over. 

And if little me was one of those regulators, the first thing I would for the time being suggest doing, is to cut in half, at least, the capital requirements for banks when lending to small businesses and entrepreneurs. And that I would do in the perfect knowledge that I need their help to rescue the economy and create jobs, and that “The Risky” have never ever caused a major bank crisis, only “The Infallible” do that when they… sooner or later, always fail.

Could axing an anti-graft watchdog actually reduce graft?

Sir I read the report by Guy Dinmore and Michael Peel titled “Italian premier to axe anti-graft watchdog” July 18 and was of course duly upset. But then I started to think about the figures mentioned and as a yearly budget of 2.5m Euros to fight corruption in Italy seems not to be sufficient it could actually be more honest, and less corrupt, not having a watchdog at all.

It also reminded me of once when at an anti-graft conference I commented that those selling themselves as “anti-corruption experts” sometimes sounded to me as if they could themselves be involved in an extremely subtle form of corruption. I got some strange looks!