Many or perhaps most of our bankers would be much better off, at least happier, if they heeded George Bank’s “Let’s go fly a kite!”

Sir, John Gapper refers to “Two academics who studied investment bankers in London were surprised by their degree of cynicism and noted the absence of ‘meaningfulness, emotions and personal investment in work values’. “Bankers have been alienated from their jobs” July 11.

Call me a romantic if you want but, I know that when bankers who felt proud of being savvy loan officers were, with the introduction of the risk weighted bank capital requirements, pushed aside by equity minimizing and leverage maximizing financial engineers, there had to be a lot of frustrations.

Imagine if you as a loan officer had analyzed in depth the plan an entrepreneur presented in his credit application; and you had gotten to know him well; and you had agreed on a risk adjusted interest rate that made sense for both of you, and then your superiors told you: “No we can only leverage our equity 12.5 times with this loan so you either get him to accept a much higher interest rate, or we’re not interested”… and you knew that higher interest rate doomed the viability of the project? Would you not then feel like our beloved George Banks, that you’d better go and fly a kite?

Sir, most of those who became bankers during the last three decades must have a very hard time understanding what “It's a Wonderful World" is all about.

@PerKurowski

How much of billionaires’ wealth might have de facto already been redistributed?

Sir, John Gapper writes interestingly, from the perspective of how these are designed, about “public art museums funded by billionaires”. He concludes in that, as so many follow the same principles; it is beginning to have similitudes to a franchise. “Billionaires are franchising the art museum” August 9.

Currently in the political market, way too often we hear offers phrased in the simplistic terms of: “Let’s take it from the filthy-rich and give it to the poor and, Puff! all odious inequality will have disappeared.”

In order to stop the creation of those false expectations, which at the end only leads to frustrations and the enrichment of the of the redistribution and/or polarization profiteers, by increasing the value of their franchises, there is a real societal need for much more information. 

Like, what wealth to be redistributed are we talking about? How much might billionaires have already de facto redistributed their Main-street purchasing capacity wealth, by demanding and buying assets that no one else but them would be demanding, at least not at those ridiculously high prices?

Not long ago, someone really wealthy, by means of a sort of voluntary tax, froze US$ 450 million of real purchasing power on a wall, by acquiring Leonardo da Vinci’s Salvator Mundi. Sir, I ask, how do you redistribute that painting without perhaps serious unexpected consequences? Cutting it in thousands of small-certified pieces, and selling these in the market for much more than US$ 450 million? 

@PerKurowski

New office habitats, promoting communal discussions, will force robot headhunters to consider social skills much more

Sir, John Gapper when discussing new open space offices that are intended to intensify creative communications writes that “companies should start by recognising what their employees fear losing” and among this, is obviously “privacy”. “Tech utopias drive workers to distraction” September 14, 2017

But the need for privacy is not only based on a wish of being alone but quite often much more on the wish to avoid some. In this respect it must be expected that social skills will be much more important when robots or artificial intelligence evaluates candidates in the future, because you cannot risk having absolute bores or pain-in-the-ass employees roaming around freely.

Evaluating human social skills? Now that’s a new challenge for artificial intelligence. I wonder what Watson has to say about it? Perhaps, a test-period in which all co-workers could use a point system to evaluate candidates? Would such discriminatory procedures be politically acceptable?

Sir, do your current headhunters discriminate candidates based on their social skills?

PS. How will robot recruiters treat their human ex colleagues they left without jobs? 

@PerKurowski

Will we humans end up banning ourselves from driving because we’re too risky?

Sir, John Gapper concludes, “in a world of cheap, convenient self-driving vehicles, only the wealthy and fussy will bother to buy a car” “Why would you want to buy a self-driving car?” December 8.

Wait a second. Is Gapper saying that only the wealthy, buying cars, might save some jobs? That does not sound like too politically incorrect in these get rid of inequality Piketty days.

But, jest aside, what I most fear, is the day we humans ban ourselves from driving altogether, because we are not safe enough, because we are too risky.

With automation substituting us humans in so much, what mutations will that provoke? What capabilities will we lose?

PS. Beware though of a Basel Committee for Transit Supervision. If it interferes, like the Basel Committee in the process of allocating bank credit to the real economy, then the human race might disappear in the mother of all massive car crashes.

@PerKurowski

As banks “pressure employees to hawk products”, regulators pressure banks to odiously discriminate against the risky

Sir, John Gapper writes about “the intense pressure Wells Fargo placed on employees to hawk products” “Wells Fargo reaches the end of its journey” September 22.

But, by means of the risk weighted capital requirements for banks, regulators have placed much pressure on banks to lend to what was perceived, decreed or concocted as safe; because that’s were they could leverage the most their equity; because that’s where they could earn the highest expected risk adjusted returns of equity; and so banks end up with excessive exposures to residential home financing, AAA rated securities, loans to sovereigns like Greece and other such fancy safe stuff.

That created also a de facto immoral regulatory discrimination against the access to bank credit of those who ex ante are perceived as “risky”, like SMEs and entrepreneurs. I place quotation marks around risky because in fact, by being perceived as that, they are never as dangerous to the bank system than what is perceived as “safe”.

Incentives are temptations, aren’t they? 

@PerKurowski

Caring more about us, the targets, would go a long way to improve advertising efficiency on the web, and reduce fraud.

Sir, John Gapper describes some tip of icebergs in the word of online advertising “Regulators are failing to block fraudulent ads”, February 3.

But I also assume that those paying for the ads do not pay, or stop the advertising, if the ads fail to translate into profits.

We, the targets, we used to be hit with some few advertising bullets while reading a paper, looking at TV or listening to radio… now, on the web, more and more we are hit with thousand of ad pellets, which give very little consideration to the physical limits of our attention span. If the computer has a malware that keeps it reading ads while I sleep I don’t care… but when I sit there and try to use the web for its original purposes the ads are really getting into my way and into my nerves.

What could be done about it? I have suggested the advertisers, with the help of ad-blockers, take contact directly with us the targets. I am sure we could work something out. I my case I have offered to hire out my very scarce attention span for 30 seconds against the low price of US$ 1… initially!

@PerKurowski ©

If I were a bank regulator, I would at least give Dyson’s engineering a call.

Sir, I refer to John Gapper’s and Tanya Powley’s fabulous interview with James and Jake Dyson “All inventors are maniacs” April 11.

Just thought you might be interested in a post last year on my subprime-bank regulations blog. It begins with:

“There I was trying to dry my hands wringing them in some tepid air blowing from the round hole of an appliance, thinking about how much more efficient the flat whole hand reaching drier was, when suddenly I thought… if I were a bank regulator I would at least give Dyson’s engineering group a call to see what they would think I should do….

I invite you to read it:

http://subprimeregulations.blogspot.sg/2014/09/more-than-voice-and-american-idol-we.html

@PerKurowski

For access to confidential private Swiss banks accounts, why not “wealth asylum”, something like political asylum?

Sir, John Gapper writes “there are decent reasons apart from tax evasion, or even legal tax avoidance, for the wealthy to put money in Swiss banks”, yet he with reason asks “the rich”, whether that is “any way to behave”, since doing so they will “resemble money launderers”, “Private banks must be more than laundries” February 12.

But Sir, why should a rich have to give up his private Swiss bank account if his reasons are decent?

It seems that what could be needed is something like a Swiss government office where a person can go and request “wealth asylum”. He would there of course have to present reasonable evidence of his source of wealth not being illegal.

If granted, such asylum would offer special confidentiality rights, which would be guaranteed for as long as the Swiss government does not receive substantial proof that shows the application contained major falsehoods.

If Robin Hood could hide in Sherwood Forest why can’t wealthy hide in private banks? I mean let us be frank; there are many bad Sheriffs of Nottingham out there.

If persons are allowed to carry guns against bandits, why not, in these Piketty days, can the wealthy carry private Swiss bank accounts against some overly greedy government bureaucrats?

And sometimes even if its not all "legal": If a poor North Korean managed to evade paying taxes and escape with some money, should not his capital have right to anonymous asylum?

But why on earth should you think about putting the burden to decide about what’s decent and what’s is not, on a small bank clerk who might rarely been out of his country?

PS. Am I wealthy? No! But just like for instance a shoe-artisan in Milan knows it, I know that the higher the number of wealthy around me, the more likely I am to be better off… and so, sometimes, though not too frequently, I also have to think a bit about how to keep the wealthy wealthy. If you have to be a servant, then most often, though not always, you are better served having to serve a wealthy master.

I am very suspicious of those who seem wanting to promote shared poverty… because quite often it sounds like their populist business plan for trying to become very wealthy themselves. And I do oppose the redistribution profiteers

PS. But then, now and again, I get hit by the thought: "If the wealthy could not safeguard their wealth in other countries, then perhaps they would make a stronger stance and defend their wealth more in their own country". And that sometimes could be what is really most needed.

Systemic distortion of bank credit allocation, is worse than risks with “global systemically important banks”

In November 1999 I concluded and Op-Ed with: “Currently market forces favors the larger the entity is, be it banks, law firms, auditing firms, brokers, etc. Perhaps one of the things that the authorities could do, in order to diversify risks, is to create a tax on size.”

And in May 2003, then as an Executive Director of the World Bank, addressing many regulators at a workshop, I argued: “Knowing that ‘the larger they are, the harder they fall’, if I were regulator, I would be thinking about a progressive tax on size.”

And so Sir, of course I agree with John Gapper in that “Regulators are right to cut the biggest banks down to size” January 8.

But that said, why is it that even though Gapper clearly understand the meaning (and cost) of higher capital requirements for banks, he seemingly cannot understand what different capital requirements for different bank borrowers mean.

The “risky”, because their borrowings generate higher capital requirements for banks than the “safe”, are being negated fair access to bank credit.

More important than increasing the capital requirements for those banks like JPMorgan that because of their size pose a “global” systemic risk, it is much more important to get rid of the risk–weighted capital requirements which constitute, not just a risk, but an existent systemic distortion that impedes the efficient allocation of bank credit.

Britain, frankly, don’t you think your forefathers would be ashamed of you.

Sir, I refer to Mure Dickie´s “Battle for Britain”, September 18.

As a professional, with an MBA, I left a very good paying job in my homeland Venezuela, and with the financial support of my father in law, spent a whole year with my wife in London, as an intern at Kleinwort and Benson, and studying corporate finance at London Business School, and International Economic at the London School of economics.

Now, why on earth would I do a thing like that? If I had to explain it, besides of course being alone with my wife, and the English music groups of the 60s, it would be because of Winston Churchill, the traditions of English merchant banks, and British stiff upper lips.

And therefore it has been so sad to me to observe over the last decade, how for instance the Financial Times, the paper I then eagerly read and now just read, does not care one iota about the fact that bank regulations, with credit risk based capital requirements, is making Britain into just another run of the mill risk-adverse nation.

Frankly, don’t you think your forefathers would be ashamed of you.

And then, same day, I read John Gapper admonishing “Scotland has to be braver to build strong banks”, and my reaction is… is this a joke? What about Britain recovering some of its own brave banks?

PS. How is it possible that FT finds nothing wrong with banks being able to leverage so much more their equity for what is perceived as absolutely safe than for what is perceived as risky, when those credit risk perceptions have already been cleared for with interest rates (risk premiums) amount of exposure and other terms? If you absolutely must distort with capital requirements, would it not be better to do so with a purpose, like the creation of jobs or the sustainability of mother earth?

PS. FT has been squarely in favor the NO with respect to Scottish independence. Can you imagine what we could have achieved if FT had taken a similar position on allowing some unelected regulators to distort the allocation of bank credit in our economies?

Where would our economies be without chancers, hustlers and other wheeler dealers?

Sir, John Gapper rightly nudges the question of where our economies would be without chancers, hustlers and other wheeler dealers, “Ecclestone is a chancer who has earned a final chance” August 7.

And though we would surely not like to see one of our daughters marrying one of these we regard as social misfits, there is no doubt that without them our economies would go stale.

Think of it. How much capital is currently not in action, giving jobs to many, only because someone convinced its owners of being able to make huge returns with no risks? Are we instead to have all our savings only safely increasing the value of the Picasso’s hanging on our walls? 

But, even so, I abhor the risk-weighted capital requirements for banks based on perceived credit risks. 

With these we are giving special access to bank credit to those who specialize in dressing up as “absolutely safe”… like the infallible sovereign entrepreneurs. 

But why would we want to withhold fair access to bank credit for the “risky” medium and small businesses, entrepreneurs and start-ups, with other type of knowledge and drive? That sounds like an unnecessary limitation which can’t really be good for anyone… in the long run.

I’ll sue Facebook if it makes me sad

From Mr Per Kurowski.

Sir, I refer to John Gapper’s article “We are the product that Facebook has been testing” (July 2), about the research Facebook has been carrying out on whether our feelings can be influenced. I find that research to be absolutely great news!

Now Facebook, without us having to spend one penny on it, has with its own money conducted the research that proves conclusively that it needs to be controlled. And, to top it all off, it already confessed the motives and intentions of what it was up to. And what’s more, it did so, as Mr Gapper says, without really seeking anyone’s consent. Had it done so, its confessions would not have been half as useful.

But since that research might also open a window in how Facebook could branch out in the future by offering one Happy-Facebook, one Sad-Facebook and one Slightly-dull-neutral-Facebook, let me hereby formally notify Facebook that I want to be happy, and if it makes me sad I will sue it into oblivion!

By the way, at what point could Facebook be labelled a stalker?

Published in FT

http://perkurowski.blogspot.com/2012/06/we-might-need-global-web-constitution.html

Maybe it is time to revisit the whole concept of progressiveness in taxes.

Sir, John Gapper, perhaps solely wearing his hat of a writer, basically proposes creating a publisher monopoly in order to counter the growing strength of a distribution monopoly such as Amazon, “Publisher must become giants to take on Amazon”, May 29.

As a reader, I am not certain I want to be squeezed by those who clearly would then have an interest coming into some agreements that might not benefit me, though the truth is that technological advances married to the reach-out of globalization, do seems definitively to be leading us down that path.

And what can we do to keep alive our alternatives? I have not given too much thought on how it could be implemented but I think that the introduction of tax-rate progressiveness, for corporate profits and or dividends, based on market shares, could be something worthwhile to explore.

Why for instance should “The Shop Around the Corner” have to face the same tax structure as Amazon?

And of course, in the same vein, why should a company that fights naked and unprotected in the markets face the same tax structure as one that operates under the protection of intellectual property rights?

If erasing, Google must be sure it is duly authorized to do so, and should keep a public record on the erasers

Sir in principle I agree with John Gapper in that “People do not have the right to erase the web’s memory” May 15. That said, thinking on my own youth, and though I do not remember all my doings very well, I guess there might have been occasions when I was lucky these were not memorized by a web, and so I guess my grandchildren should have the same right.

What I am more concerned about is the possibility that someone else instructs Google or someone in Google takes it upon himself, to erase without authorization one of my memories causing me to suffer from web Alzheimer. And in this respect, were the erasing to start, then Google needs to make sure the erasing is authorized and keep a public record of all erasing going on preferably with an identification of what was erased, a photo or something else. At least in this case John Gapper could have seen that his developer was hiding something. 

And what if there is a photo of two and one wants it erased and the other dearly wants to hang on to the memory?

Richard Lambert, before concerning himself with bankers’ education should think about bank regulators’

Sir, I refer to John Gapper’s “There is no such thing as the banking profession” February 13.

There Gapper writes that an option favored, among others by Sir Richard Lambert, head of UK’s Banking Standards Review, “is to encourage bankers to take professional exams and rebuild their sense of pride and identity. Bad bankers might be struck off by professional bodies”

Good idea, but what about the professional exams for bank regulators which right now seems of even urgent importance.

You know Sir I hold this because bank regulators who decide to use perceived risk of expected losses to set the capital requirements for banks, that which is primarily to cover for any unexpected losses, evidence they do not know what they are doing. With their amateurism they not only created this crisis, by making banks create dangerous exposures to what is “absolutely safe”, but they also keep us from getting out of the crisis, by de-incentivizing banks from lending to “risky” medium and small businesses, entrepreneurs and start-ups.

So please, enroll regulators in a Bank Regulations 101 course… as fast as possible. With their distortions they have put the current generation on the track of becoming a lost one.

There are productive and there are destructive inequalities, and we must know which are which.

Sir I refer to John Gapper’s “In search of balance: Capitalism”, December 24.

I have no problems with most of the “productive” inequalities which result from courageously moving forward – when financing the “risky” future, when increasing the cake. But I do have problems with many of the “destructive” inequalities, which occur when just trampling in the water, when extracting the last ounce of juice from any past risk taking – when refinancing the “safer” past, when only wanting to distribute the cake.

In this respect, when Pope Francis says “I exhort you to a generous solidarity and a return of economics and finance to an ethical approach that favors human beings”, I most emphatically have to state that the current capital requirements for banks based on perceived risks, risks already cleared for elsewhere, is definitely not an ethical approach to economic and finance.

And since Gapper makes a reference to Branko Milanovic of the World Bank, the author of “The Haves and the Have-Nots”, I must also comment that it is truly surprising to see how few realize how these regulations, which favor the Haves and discriminate against the Have-Nots, constitute one of the foremost drivers of “destructive” inequalities.

And that the World Bank, the world’s premier development bank, and who should be the first to know that risk-taking is the oxygen of development, keeps quiet on this whole issue, just makes me very sad for the future generations.

FT, please try to reflect on where we in the Western World would have been, had those risk-weighted capital requirements introduced over the last three decades by the Basel Accord, always applied.

FT, perhaps you should incorporate “and with humility” in your motto, just as a reminder

Sir, in “After Rev Flowers”, November 20, you write that “UK bank’s woes have lessons for politicians and regulators”. You forgot to include financial journalists in that list. 

For instance, you write that Mr Flowers “overestimated a key capital ratio by a factor of two”. Do you really want me to list all of your journalists who at the outset of this crisis wrote of bank capital ratios seeming to be in line with historical ratios, ignoring that the current were based on risk-weighted assets and not as previously on total assets? Doing so your own journalists (and politicians and regulators), often underestimated European bank capital ratios by a factor of five. 

Be sincere… when did you yourself discover that in fact European banks had real asset to capital leverages of way over 30 to 1 sometimes even over 50 to 1? 

John Gapper was one of the very first to understand what was happening with his “How banks learnt to play the system”; but it took a long time for many others to do so, and some might not even have done so yet. 

But Sir, do not be ashamed, you are not alone. Other actors like the IMF reported on Iceland in December 2008 the following “The banking system’s reported financial indicators are above minimum regulatory requirements and stress tests suggest that the system is resilient.” And that clearly shows IMF had no real idea either about what risks risk-weighing could be hiding or causing. 

But, Sir, perhaps you should incorporate “and with humility” in your motto, just as a reminder.

With regulators like Mark Carney there is no future in finance for the City, or for the rest of the economy for that matter

Sir, John Gapper writes that Mark Carney, the new “Bank of England governor, has arrived from Canada with a dose of can-do spirit”, “Carney is wise to nurture the City´s future in finance” October 31.

“Can-do spirit”? Ha! There is nothing as far from a can-do spirit than capital requirements for banks which are higher for what is perceived as safe, than for what is perceived as risky. These not only guarantee that banks will not finance the future but mostly refinance the past, but also guarantee the kind of distortions that will make it impossible for the banks which are not in the shadows, to survive.

How can we have reached a point where we can write about “a knowledge industry that has been vital to growth and trade since the 19th century” blithely ignoring there is no way that 19th century banks could have done what they did, with current regulations.

Let me try to explain the regulatory lunacy again, in terms of knowledge. If banks know (or believe they know) the risks, and adjust for these in interest rates, size of exposures and other terms, what business have regulators adjusting for exactly the same “know” in the bank capital?

The role of a banker is to stop his bank from failing”, while the role of a regulator is to see how to stop bankers from failing to stop their banks from failing, and, if banks fail, to see that the hurt will be contained as much as possible. In other words: Though a banker might very well look at credit ratings, a regulator must not look at these, but at how bankers look at credit ratings. Why is it so hard for Mark Carney and his colleagues (and John Gapper and his colleagues) to understand that?

PS. From Edward Dolnick’s “The Forger’s Spell” I extract that the psychologist Leon Festinger once marveled: “A man with conviction is a hard man to change. Tell him you disagree and he turns away. Show him facts or figures and he questions your sources. Appeal to logic and he fails to see your point”. Does this apply to me, or to the bank regulators and Financial Times journalists, or to all of us?

Society is still unaware of the real costs of lessening risks and promoting the stability of its banking system.

Sir, John Gapper’s “Regulators are finally catching up with banks”, July 4, in reference to some possible new costs resulting from recent new regulations announced this week by the Fed, just shows how little it is yet understood what is the real “price society and the financial system pays from lessening risks and promoting stability.”

The first cost, is the current bank crisis. It resulted from allowing banks to hold exposures to what was perceived as absolutely safe against absolutely minimum equity, and so that, when some of the perceptions turned out to be wrong, banks were caught with their pants down holding no capital.

The second cost, which could be even larger than the first, are all opportunities lost because of the introduction of regulatory risk-aversion, and which has certainly impeded many small and medium business and entrepreneurs to assist in creating jobs for our youth.

Current bank regulations which still include discrimination based on perceived risk, do not promote stability in the banking system, but the stiffness that causes fragility. Also there is no banking stability worth to write home about, without a sturdy and healthy real economy.

Gapper also refers to Jamie Dimon, chairman and chief executive of JPMorgan Chase, once describing Basel III as “anti-American”. Indeed it is anti-American, but not for the reasons that Dimon probably refers to, but because, in “the Home of the Brave”, these regulations favor “The Infallible” and discriminate against “The Risky”.

It was bank regulators’ excessive safe-taking which caused the crisis

Sir, John Gapper writes “The City’s freewheeling culture contributed to excessive risk-taking”, “Europe finally takes its bite from the City of London” February 21. That is incorrect and highly misleading.

All recent bank problems, like most in bank history too, derive from excessive exposures to what is perceived as absolutely safe, and not from excessive exposures to what is perceived as “risky”. What made this crisis particularly bad, was the fact that bank regulators now allowed banks to hold so little capital against assets so dangerously perceived to be absolutely safe. And so, what really happened, could be better described as an excessive regulatory safe-taking.

“Oh but the bankers should have avoided those dangerously huge 'safe' exposures” you might say. Yes, in theory. But, in practice, the fact that banks were allowed to leverage more than 60 times on some assets, and only 12 times on other, created irresistible competitive pressures which doomed the banks to dance, until the music stopped… and anyone not knowing this does not really know of banks, or of any other business for that matter.