If the helicopter is to be piloted by a bank regulator you must absolutely keep it on the ground.

Sir, John Kay gives us the image of a central bank governor flying across the country in a helicopter, a “deranged grin on his face as he showers money on a grateful populace”, “…and the argument for keeping the chopper on the ground”, February 13. 

That image is great but wrong. Inasmuch the central banker also believes himself to be a Basel inspired bank regulator, he would only shower money on the financial aaaristocracy, like the AAA to AA rated securities or the “infallible” sovereigns, and avoid like pest giving any money to “The Risky” populace.

The most important argument for keeping the chopper on the ground is that it would be much more useful to eliminate the capital requirements for banks which discriminate based on the perceived risk of the assets of the banks, and not on the risk of the banks. That would allow banks to once again perform their vital social function of allocating economic resources in as an efficient way as possible.

If that cannot be done, because that would require the bank regulators to be sufficiently courageous as to admit they were totally wrong, the helicopter might be our best possibility, but that only as long as no bank regulator is piloting it.

PS. No Mr. Martin Wolf, our banks are not terminally ill, and we don’t have to go communist

Gillian Tett again mingles with the aristocracy of finance in Davos, while blithely ignoring the commoners

An entrepreneur or a small or medium sized business, if there were no bank regulations could have been offered a loan $400.000 loan at 7%, but now, only because they are regulated with Basel Committee criteria, the banks will only offer $200.000 at 10%.

But why should Gillian Tett care about the commoner, “The Risky” when she once again can enjoy being surrounded in Davos by the financial aristocracy “The Infallible” and “The Regulators”? Frankly she should be ashamed of herself writing “Davos elite take note: the public don’t trust you” January 26 when she, as a journalist in one of the most important financial papers, has so blithely ignored the topic of how regulators, without explaining themselves, and much less being held accountable to anyone for what they do, distort and discriminate.

Let me remind her again that the Mario Draghi that now presides her European Central Bank is the same regulator who presiding the Financial Stability Board thought, and perhaps he even still thinks so, that it was perfectly correct to allow a bank to leverage its equity 62.5 times to 1 when lending to Greece, but only 12.5 times to 1 when lending to “The Risky”.

Basel by again favoring the infallible AAAristocracy, deals another blow to the risky commoners of the real economy.

Sir, in your “Basel bends on liquidity rules” you write “a broadened class of eligible assets… makes the liquidity coverage ratio less onerous [for the banks]” January 8.

That is correct, for the banks, but absolutely not for those not included in the “broadened class of eligible assets”. For “The Risky”, the unrated or not so good rated small medium businesses and entrepreneurs, the commoners of the real economy, they will have to face even worsened conditions when accessing bank credit.

In the real economy, those perceived as more risky than others are those who on the margin are the most affected by regulations which favors the aristocracy of “The Infallible”. And this is what Basel bank regulators fail entirely to understand, probably because they have never ever left their desk and walked around in the real economy.

The taxpayers, the unemployed, especially the young, the banks,“The Risky”, of course, but even "The Infallible", the Sovereigns and Triple-A rated aristocracy, we are all going to pay dearly for having entrusted our banks to these regulators.

When are these Basel bank regulators stop concerning themselves exclusively with the health of the banks and start thinking about what the impact of their regulation has on the real economy? Do they really believe banks can survive even when the real economy sinks?