What we need are central bankers that knowing the risks and problems dare to do their best.

Sir Stephen Roach in “The case against Ben Bernanke” August 26 sums up with “The world needs central bankers who avoid problems, not those who specialize in post crisis damage control” He is absolutely right with the second part, but neither does the world need central bankers who avoid problems, it needs those that knowing the problems try do the best out of it.

We have had enough, for a very long time, with those problem and risk avoiders that got together in the Basel Committee. Look where the banks ended up egged on by their minimum capital requirements based on risk and the lousy supreme risk-sentries that they anointed.

Take away some of the incentives for consumer lending

Sir, January 8, Stephen Roach argues that “America’s inflated asset price must fall” in order “to shift the mix of savings away from asset appreciation back to that supported by income generation” and which sounds desperately drastic when there are other means to do that.

Anyone who lives in the US and receives ten pre-approved credit card offers each week and still, six months into a crisis, has to answer five phone calls a day offering mortgages, must know that some other forces than asset prices must be driving debt creation.

Since so many seem capable to so easily switch from praising the US for being the locomotive of world growth to “being the main culprit behind the destabilizing global imbalances” let me at least point out what I think is also responsible for the current sad state of affairs.

The securitization of consumer debt which allowed the creation of low risk financial instruments, plus the introduction of the minimum capital requirements for the banks and which are exclusively based on risks, as perceived by the credit rating agencies, constituted a massive dose of incentives for the financial system to go after the consumers, in the US and everywhere. Taking away some of the incentives to offer unreasonable consumer credits might long term be a much wiser thing to do for a nation than having the price of their assets fall from the skies.