Would Janet Yellen be able to hear my question, if I was able to make it?

Sir, Robin Harding quotes Janet Yellen: “There are still too many people who want jobs but cannot find them, too many working part time but would prefer full-time work, and too many who are not searching for a job but would be if the labour market were stronger” “Yellen sticks to script as impatience rises”, September 18.

If I had a voice in the Federal Open MarkeT Committee, which I have not, I would have loved to have asked Janet Yellen: 

“And how many of those so affected, can we estimate to be the result of us requiring our banks to hold much much more capital, meaning equity, when they lend to medium and small businesses entrepreneurs and start ups, than what we require them to have when they lend to the Federal government or to the AAAristocracy?”

I wonder whether Janet Yellen would have even heard my question.

And what if the captain of the Titanic had unwittingly directly set the course on an iceberg?

Sir, I refer to Tim Harford’s “Let’s have some real-times economics” March 8.

Let’s suppose we have parents who like cookies and chocolate and dislike broccoli and spinach so much they want to make certain their kids eat cookies and chocolate and stay away from broccoli and spinach.

And so, ignoring that kids already share their taste preferences, they reward their children with chocolate if they eat cookies and punish them with spinach if they eat broccoli.

And of course the result is their children grow into a generation much more obese than their parents who, in their younger days have been told to eat broccolis and spinach too.

The above describes the risk-weighted capital requirements that, one way or another, especially since 2004 when Basel II was approved, have distorted the allocation of bank credit to the real economy.

Banks are told that if they lend to the “safe”, something which they already liked, they need to hold less capital and will therefore be rewarded with higher risk-adjusted returns on their equity than if they lend to the “risky”. 

And, as a result, the “infallible sovereigns”, the housing sector and the AAAristocracy receive too much bank credit in too lenient terms; while the “risky” medium and small businesses, entrepreneurs and start-ups receive too little credit in too onerous terms. And as a result the banks grow dangerously obese with “safe” fats and carbohydrates, all while the real economy becomes weakened from the lack of “risky” proteins.

And so, if Harford can express the “frustration of watching… Titanic… The ship is doomed, yet our heroes suspect nothing ”, when reading the recently published transcripts of the Federal Reserve’s Open Market Committee held on September 16 2008, to me it is worse. 

I see no evidence of that, at least with respect to bank regulations, "our heroes" show they knew they were setting the course on an iceberg. Worse yet, they might still not know it, and so our banks and our economies are set on the course of crashing into new icebergs.

As a bank regulator, Bernanke is neither a good nor a humble engineer

Sir, Edward Luce writes “Bernanke: a good engineer who knows his own limits” March 11. I am absolutely sure Ben Bernanke has many good attributes and he most probably acted as good as anyone could, as a central banker, in order to kick the can of a serious recession down the road; because we all know that is the most we can considered achieved, at least for the time being.

But, if are going to have a chance of economic growth vigorous enough to absorb all the QE´s and then some of the fiscal deficits still to come, we need even better and even humbler bank regulating engineers.

I say this because it is quite clear, at least from what we could read in the recently released transcripts of the Federal Open Market Committee of 2007, that this particular engineer, Bernanke, was not even aware of or did not understand how capital requirements for banks, based on credit information already digested by the markets and the banks, causes immense distortions.

And those distortions, more capital when lending to "The Risky" than when lending to "The Infallible", is making it much harder than usual to access bank credit, for those extremely important economic agents who act on the margins of the real economy, and who almost as a norm belong to "The Risky".

Current bank regulators, with their not so humble expectations of being able to deliver “safe” bank lending are helping to turn the world into a more dangerous place. Their bank diet, which promotes bank lending to the AAAristocracy and to the “infallible” sovereigns, and constrains lending to "The Risky", can only cause economic obesity and none of the vigor and sturdiness we need.

And that Mr. Bernanke seems unable to understand, just like Edward Luce, and just like you Sir.

“Helicopter Ben”? We wish! At this moment it seems more like "Drone-with-a-bad-guidance-system Ben"