Should financing gas chambers in Auschwitz be right if the risk premiums are right?

Sir, Steve Johnson quotes Claudia Calich, the emerging markets debt manager at M&G Investments: “with a lot of the countries [EM bond funds] invest in . . . If you start to be very strict on every country, there would be very few that are squeaky clean in terms of democracy and human rights.” “Investors bet Venezuela crisis triggers default” June 6.

What does she mean to be “very strict”? Not investing in a country because of corruption and mismanagement, in which people die for lack of food and medicines, and where human rights’ violations are committed, is that being too strict?

The world needs a sovereign debt restructuring mechanism (SDRM), and the first order of issue of such mechanism, should be to classify the credits being presented for collection into bona fide, suspicious and outright odious. 

As a citizen, I can’t wait for that date when credits given to a government, with interest rates that exceed in some substantial way those paid by other safer sovereigns, have their collection possibilities automatically restricted by a SDRM. For instance those buying bonds for 30 cents on the dollar, should not be able to present for collection more than those 30 cents.

Those knowingly financing human right violations should also be deemed accessory to those crimes. 

Sir, financiers might need credit ratings, but we citizens need ethics-ratings even more. Those ethics ratings should of course reflect the existence of accusations for violations to human rights. . 

http://unsustainabledebtsustainability.blogspot.com

@PerKurowski

While regulators think they’ve done theirs with banks, the regulatory distortion of credit allocation is in crescendo.

Sir, according to Steve Johnson “Mark Carney, suggest that global regulators have now cleaned up the banks, with their notoriously high levels of leverage, and had a new target in their sights”, “The big elephant in a small pond effect” February 2.

That is very serious coming from the Chair of the Financial Stability Board because when it comes to regulators, they have definitely not cleaned up their act.

As I have told you many times lately, as a result of regulators increasing the floor level of bank equity requirements, primarily with the leverage ratio, the effective squeeze on those borrowers being discriminated against by means of the credit risk weighted equity requirements, like small businesses, has only gotten worse. If in need you should see the film “The Drowning Pool” to understand visually what is going on.

And in that respect it is clear that the regulatory distortion is in crescendo while it is still being ignored. Sir I wonder how long will it take FT get it? That an AAA rated client cannot get access to bank credit because the bank only has sufficient required equity so as to be able to lend to an “infallible sovereign”?

And now, in the age of transparency, the European Commission is promoting blissful ignorance. Holy mo! Back to the Dark Ages!

Sir, I refer to Steve Johnson’s “Money market ratings ‘outlawed’” of September 9 in your FTfm.

There Johnson writes of a proposal by the European Commission to ban money market funds from soliciting or financing a rating from a credit rating agency” so as “to end the risk of sudden massive redemptions” from a fund in the wake of a rating downgrade, [thereby[] strengthening the financial stability”.

What can we say? Now the European Commission is promoting blissful ignorance. Holy mo! Back to the Dark Ages!

Why do they not just impose a little note after each credit rating stating who paid for it? And let the market take it from there?