63 year old grandfathers need to stick together, ‘cause next year… we’ll be "Sixty-Four"

Sir, to be interviewed in FT´s Life&Arts must be an honor for an author. But for 63 year old grandfather Martin Amis, to be described when opening the door to the interviewer Martin Dickson, as having skin which has advanced from “plump to papery”, clearly must spoil much of the fun.

As a 63 year old grandfather, pondering the fact that next year we’ll reach that so distant “When I’m Sixty-four”, we heard the Beatles sing just minutes ago, with our respective Vera, Chuck and Dave on our knees, I feel I should express my deepest sense of solidarity with Mr. Amis.

We should also strip the Financial Times of its honorable motto

Stripping someone of his honorific title does seem to be a quite civilized way to shame those who seemingly have done society wrong… and society really needs to recover, urgently, some serious shaming powers. 

That said, in order for shaming to really work, it should not be seen as singling out someone to shame, like in the case of Fred Goodwin, especially when it is well known that others should be on the list.

Independently of what regulators say, the banks and the markets consider the perceived risk of default, such as that information contained in the credit ratings, when it sets the interest rates, the amounts and the other terms of a financial exposure. 

That is why, when the regulators decided to use the same information for setting the capital requirements for banks, they guaranteed an excessive bank exposure to what is officially perceived ex-ante as not risky, like the triple-A rated securities and infallible sovereigns, and an underexposure to what is officially perceived as risky, like lending to small businesses and entrepreneurs… and that was the primary cause of this systemic financial and bank crisis.

I have written literarily hundreds of letters to the Financial Times during the last seven years about this almost unbelievable mistake committed by the bank regulators, and these have all been ignored. Now, if truth is silenced, we should not be surprised to see many pseudo-truths prosper, which is one reason that banker bashing has achieved its current levels of popularity and why regulators have not even come close to being held to any real account.

Therefore I am of course in total agreement with Martin Dickson´s “The burn-a-banker frenzy is tempting – but wrong”, February 4, when he reminds us of perhaps also burning “those meant to police the credit system”. 

But, to that, I would also add the need of stripping the Financial Times of its honorable motto “Without fear and without favour”, since obviously its silence, can only be explained in terms of journalistic or media cronyism... which is a public bad.

http://www.teawithft.blogspot.com/search/label/subprime%20banking%20regulations

Do not help the regulators to get off the hook.

I have always thought that bank regulations should primarily focus on stimulating the banks to take the kind of risks that are more useful to society, and so that, when something goes wrong, as it will do sooner or later, that it has all at least been worthwhile.

Instead the Basel Committee focused on trying to exorcize risk-taking from the banks so as to guarantee bank stability, something that per se does not serve society much; by allowing for some minuscule capital requirements for banks as long as they lent to or invested in operations that the credit rating agencies perceived as risk free… in other words:

Sheer lunacy! There is nothing to be obtained by giving those already blessed with being perceived as having low risks the additional advantage of generating low capital requirements for banks.

Sheer lunacy! Since capital by nature is already too coward, assigning special preferences to the “safe-havens” guaranteed these were to become overcrowded and create a new set of risks.

Sheer lunacy! Only some extremely gullible and naïve regulators would be unable to see that beside the fact that the credit rating agencies, composed by humans trying to measure hard to define risks were bound to go wrong, sooner or later, that with these regulations they were being set up for capture by many interested parties.

And this is why though I absolutely agree with much of Martin Dickson’s “The bankers who wouldn’t say sorry: a cautionary tale”, December 29, I completely disagree with it as a whole, since by pointing excessively at the bankers it might help the regulators to get off the hook.