Damages by Euribor rigging are peanuts compared to bank regulators’ rigging of credit allocation to the real economy

Sir I refer to Rochelle Toplensky and Martin Arnold write on “Brussels will hit HSBC, JPMorgan and Crédit Agricole today with multimillion-euro fines for rigging the Euribor interest rate benchmark” “Three banks fined over rate-rigging” December 7.

For years I have argued that if banks are to be fined, they should pay those fines in shares, since having their capital diminished by forcing them to pay cash, is pure masochism as that will affect their capacity to give credit; and since we also want banks to hold more capital.

But also in this case let me note that whatever damages these banks could have caused with their rigging of Euribor, these are peanuts when compared to what bank regulators did by rigging, with their risk weighted capital requirements, the allocation of credit to the real economy with their risk weighted capital requirements for banks.

If not fined, these regulators should at least be publicly shamed and banned forever from regulating banks… or anything else.

@PerKurowski

Jamie Dimon should consider the long-term interest of his and of JPMorgan’s shareholders’ children and grandchildren

Sir, Ben McLannahan reports on Jamie Dimon’s letter to JPMorgan’s shareholders’. “JPMorgan chief Dimon warns on dangers of undermining US banks” April 7.

In his letter Dimon argues that tougher rules can weaken the competitiveness of US banks, for instance against the Chinese banks. That’s true! Especially in the short-term.

And McLannahan reminds us that “In 2014 Dimon argued that tougher rules would mean that customers faced more expensive credit, or would be denied certain financial products altogether.” That is also true!

But Dimon must also be perfectly aware that current bank capital requirement rules, for when lending to those ex ante perceived as “risky”, are much tougher than those for exposures to the “safe”.

And I refuse to think that Dimon does not know that distorting the access to bank credit in favor of the “safe” government and the AAArisktocracy, against that of the “risky” SMEs and entrepreneurs, only guarantees to sooner or later weaken tremendously the real economy of US. 

And I also refuse to think that Dimon does not know that no US bank should expect to be able to stand solid amid the rubbles of a ruined US economy… not even JPMorgan.

Dimon states: “The US financial services industry does not conform to simple narratives. It is a complex ecosystem that depends on diverse business models coexisting because there is no other way to effectively serve America’s vast array of customers and clients.”

And surely Dimon knows perfectly well, that a complex ecosystem is not made better by regulators who, with much hubris and little wisdom, believe they can help it with their distorting concoctions.

And so Jamie Dimon, instead of writing a letter to JPMorgan’s shareholders considering their short-term interest, should write them a letter that considers the long-term interests of theirs and his own children and grandchildren.

“A ship in harbor is safe, but that is not what ships are for” John Augustus Shedd 1850-1926 

God make us daring!

@PerKurowski ©