When regulatory madness is just that

Sir, Gillian Tett writes about “When political madness works” October 13, and in it refers to Lord Owen’s neurology paper “Hubris syndrome”, 2009. She also refers to Nassir Ghaemi’s “A first rate madness” which holds that some imbalances like depression, bipolar syndrome and hyperactive manias” could help leaders to better manage crisis. 

Hold it there! Before these imbalances become prerequisites of leadership let me state the following: 

Independently of what imbalances they suffered from, when bank regulators engaged in one of the greatest hubris exercises ever, that of believing themselves to be fully equipped to act as risk managers for the world, they utterly, and totally, failed… and their madness has not served them or us later either. 

Their regulatory discrimination in favor of The Infallible and against The Risky is killing our economies, and there is no way Gillian Tett is going to convince me they are doing us some Winston Churchill good.

And by the way... what about the hubris and or madness of some journalists? Is it good or bad?

Bank regulators too, must be chronically stressed.

Sir, John Coates writes “Chronic stress can cause us to recall mostly negative moments, to se danger everywhere, to succumb to learnt helplessness… The trading community may thus become irrationally risk averse, causing the markets to freeze and monetary policy to become all but ineffective” “Banks should train their traders like Olympic athletes” July 7. 

How interesting, this condition applies also perfectly well to our bank regulators who got us in trouble by giving banks too much incentive to venture into the officially perceived risk-free land, where for instance over 60 to 1 bank equity leverage was allowed, and have thereafter frozen in fear insisting that banks shall pursue even more what is officially perceived as risk free… and thereby dooming our banks to end up gasping for profits and capital on the last officially perceived safe beaches, probably US Treasury and Bundesbank.

Just pay for what you want and you have a slightly better chance of getting it.

Sir John Coates makes quite a disservice by giving a way too simplistic version on the problems with rewarding the much needed risk-taking in “Time to tackle this culture of rewarding the risk-takers” May 5. He sets us up to choose between the hare and the tortoise forgetting completely that the hare can produce tortoise results and vice versa. Those tortoises that have only been able to produce the $20 million in profits the first 4 years can be those giving us the $500 loss in the fifth year.

There is really nothing like a perfect incentive plan though for an investor who is looking for a five year return he should clearly be better off paying an incentive based on the five years results as easy as that. Diversity is also good... if the whole world starts looking for five year results that will be just as bad as the current one year structures... you see humans, and especially traders, they do adapt.

Which bring us to the most important part of all... knowing what the incentives are. Coates refers to the traders but perhaps more important yet is to refer to the trader’s bosses.

This is indeed an embarrassing low for FT!

Sir not only did you publish John Coates’ “Traders would do well to track their hormones” April 15, in which, based on the study of the saliva of 17 male traders over eight days, the author suggests we complement the efforts of our bank regulators to drive risk out from banking, with driving out any risk taking stimulators such as testosterones from our trading floors, but you also have Clive Cookson reporting fully on the same nonsense including a photo of testosterone in action.

Unless this is a complete mess up of an April fool joke I sincerely think you owe your readers an apology. Are we to extend this type of risk adverseness litmus tests to the professionals working for the credit rating agencies too? Why do we not start with FT editors? Seeing that you completely lost control!