FT, I have two questions and one observation to make about the securitisation and privatisation of student debt in UK.

Sir, Thomas Hale writes that after “the biggest privatisation of student loans…the first of a series of anticipated transactions that stand to create a market for graduate debt in the UK, the parliament’s spending watchdog concluded the government received too little in return for what it gave up”. “Spending watchdog criticises student loans privatisation” November 22.

The Department for Education, DfE, answered it was “confident that we achieved value for money for taxpayers… as Student loans are designed so that borrowers only repay when they can afford to [which] only means many students will never fully pay back their loans”

I have two questions and one observation to make

First question: Before a student has his debt packaged into a security to be sold off to investors, should he not have the right to make a preemptive offer for it? Not that it makes a real difference but, emotionally it might not be the same for some to owe their government than to owe Goldman Sachs  their student debt.

Second question: If taxpayer should receive value for money for all these student loans, should not those who are supposed to help students to repay their debts, the professors, the universities also have some skin in the game? I mean at this moment it would seem they get all the benefits from the students taking on debt, at no cost or risk for them.

I recently tweeted: Have you ever seen a university stating a normal investment disclosure like: “Warning, if you pay us for your studies by taking on debt, you might not earn enough to repay it.” 

Hale writes: “Securitisation, a process where assets are packaged together and sold on as bonds to investors, ranging from pension funds to alternative asset managers”

It is with respect to that I would like to make an observation, namely that of reminding that securitization is basically like making sausages, the worse the ingredients, the higher the profits. So pension funds, please beware!

@PerKurowski

When there is no contestability whatsoever, perhaps a disrupting referendum is the citizens' only option

Sir, as a Venezuelan it is with great interest I read Martin Wolf’s “Appeals to the will of the people threaten parliamentary democracy” December 9.

In my homeland, the majority of the vote established a de facto dictatorship but now, when that same dictatorship has lost its majority, it fights back against a recall referendum right, even though that right is imbedded in our Constitution.

But forget crazy Venezuela and let’s consider slightly less crazy countries. Does not parliamentary democracy also require a very high degree of contestability?

Sir, for more than a decade now, I have tried to get anyone even remotely related to bank regulations to answer some very basic questions, to no avail. Even influential columnists like Martin Wolf do seemingly not dare to pose those questions either.

In cases like this, what are “We the People” to do. Perhaps a referendum to recall all bank regulators is our only option? Otherwise…must we go on a hunger strike?

PS. Is it so impossible to have parliamentary dictatorships?

@PerKurowski

Since you cannot put up a Leave Britain to referendum, you must force your Parliament to act more forcefully in EU

Sir, Chris Giles, fighting Brexit argues: “some [EU] economic officials have been granted constrained powers to take decisions for the public good… Competition authorities help arrange the playing field on which companies compete. Parliament’s ultimate sovereignty comes in the ability to remove these powers”, “Economists’ rare unity highlights the perils of Brexit” June 16.

But the problem is that many EU issues are considered so remotely, and in such convoluted ways, that parliaments are often not even aware of what is happening.

As an example, and though it is not directly a EU authority, let me refer to the Basel Committee for Banking Supervision.

The BCBS imposed de facto credit risk weighted capital requirements for banks which meant banks could hold assets perceived or deemed as safe against less capital that assets perceived as risky. And introduced a distortion of the playing field where borrowers compete for bank credit. 

What would the chances of the following proposal having been approved by any European parliament?

“By means of regulations, and in order to make our bank system safer, we propose to help banks earn much higher risk adjusted returns on equity when lending to what is safe, like to sovereigns, the AAArisktocracy and the financing of houses; and so that they are given good incentives to stay away from lending to what is risky, like to SMEs, entrepreneurs and citizens in general”

I bet no MP would have even dared to present such proposal for consideration.

And just think of proposing what the Basel Accord of 1988 decided: “The risk weight of the sovereign (the government) is zero percent and that of citizens 100 percent”

But since BoE, where Mark Carney is the current Chair of the Financial Stability Committee, and all other locals involved seem to agree with the above mentioned distortions, you are facing much more than a stay or leave EU issue.

Since you cannot solve it by putting a Leave Britain up to a referendum, you better get your Parliament to work on issues like this, hurriedly, come what may.

I would suggest you start by asking Mark Carney why he feels it is adequate that those assets rated below BB-, speculative or worse, and to which banks would never ever voluntarily create excessive exposures to, should have a risk weight of 150%, while the AAA to AA rated assets, those to which excessive exposures is precisely the stuff that mayor bank crises are made of, these have only a risk weight of 20%.

PS. “Rare unity” between economists does not have to mean they are right. EU is full of problems and I have not seen economists considering much the possible unexpected consequences of a strong rejection of Brexit.

PS. For full disclosure I also belong to those who have had enough with at least quite many of the experts.

@PerKurowski ©