Margrethe Vestdager, Europe’s competition commissioner, dare to confront your technocrat colleagues in Basel Committee

Sir, Mario Monti raves about the policies imposed by the European Competition Commissioner Margrethe Vestdager, “The bold Brussels ‘eurocrats’ who command the world’s respect” April 25.

Indeed, taking on Goggle and Gazprom, is unquestionably a sign of great daring. Still I wonder if Commissionaire Vestdager has what it takes to stop her colleagues, other technocrats/bureaucrats , from hindering competition.

Banks are currently required by the Basel Committee to hold more equity against those perceived as risky than against those perceived as safe. And in doing so they odiously discriminate directly against those who anyhow have less access to bank credit, and anyhow need to pay higher interests, precisely because they are perceived as risky.

In other words the regulators have given those perceived as “safe”, an unfair huge competitive advantage when it comes to accessing bank credit.

@PerKurowski

Europe, you have been placed in a death spiral by dangerously mistaken risk-adverse bank regulations. Get out! Fast!

Sir, Mario Monti writes that in order for monetary discipline and structural reforms in the south of Europe to pay off Europe’s policy framework [should become] more growth friendly, "Europe’s north and south must reform together” December 20.

He is more right than he knows. Europe has been place in a death spiral by risk-weighted capital requirements for banks, and which is about as unfriendly to sturdy and sustainable economic growth there is.

Allowing banks to earn much higher risk-adjusted returns on equity when financing what is “safe” than when financing what is risky, only guarantees you will milk all there is to be milked out of your past economic development, and without replacing it with the future which can only be derived by abundant and hopefully astute risk-taking.

There’s an economic war raging out there, so we need ministers and bank regulators with vision, not janitors and nannies!

Sir, Josef Joffe’s “Merkel’s case of good politics and bad economics” September 5, makes a solid case for buying gold and go to church and pray (and perhaps buy a gun) 

What can I say? There’s an economic war raging out there and we need our finance ministers and bank regulators to be men of vision, not janitors or nannies! Has anyone seen a Lord Keynes lately? 

Personally, and not as a Lord Keynes by any means, but as a simple consultant with quite a lot of workout experience, on a recent Labor-With-No-Jobs-Day, I thought that the following could be a good idea for Europe and America to explore: 

There is currently a tremendous scarcity of bank capital, and all fresh capital raised is going to plug holes instead of generating the new business needed… and so we are in dire need of traditional bank capital, not that silly modern stuff. 

In this respect I would gladly contemplate granting a 15 years full exoneration from corporate and dividend taxes, to whatever bank capital is raised by a banks that agrees to hold 15 percent in capital against any asset, no matter how safe or risky it might seem. 

There is a world of productive risk-taking waiting out there to get our youngster their generation of good jobs… let’s give them a chance. 

I would love to see 500 billion Euros (dollars) in this type of fresh bank capital...which could be leveraged into over 3 trillion Euros (dollars) in loans which do not discriminate based on perceived risks more than what they should ordinary do in a free market. 

That could mean a fresh start for our economies and a full-stop to that other war our current bank-nannies are waging against the "risky".

Stop subsidizing status-quo and taxing development.

Sir Mario Monti in “Watchdogs of the world, unite!” July 29, makes a powerful case for the need of strong antitrust enforcement to keep market competition alive, capitalize on “creative destruction” and minimize “destructive conservation”.

In the same vein I would also request the competition agencies to look into the anti-competition implications imbedded in the capital requirements for banks, by which borrowers who can dress themselves up as having a “low default risk”, when compared to the “higher default risks”, are subsidized by the cost savings that are produced by some extremely low capital requirements. That signifies a subsidy for status-quo (the known) and a tax on development (the unknown). This exaggerated conservative risk-adverseness has already taken us over the cliff of the subprime mortgages… with nothing to show for it.