Bank regulators violated the holy intergenerational social contract that Edmund Burke spoke about.

Sir, Philip Stephens writes: “Nostalgia has always had its place in politics. Respect for tradition is at the heart of Burkean conservatism. The deep irony about the now mythologised postwar decades, however, is that these were times when citizens looked unambiguously to the future.” “Nostalgia has stolen the future” July 27.

I am from 1950, and I do feel nostalgic whenever I think of all those savvy credit officers who were now substituted by equity minimization financial engineers.

When regulators, in order to make our banking system safe, ludicrously decided that what was perceived as risky was more dangerous to bank systems than what was perceived as safe, they distorted the allocation of bank credit in favor of the “safer” present so much that they de facto sacrificed that risk taking the “riskier” future needs. That is an egregious violation of that holy intergenerational social contract that Edmund Burke spoke about.

Those regulators are autocratic besserwisser populists who concoct their ideas, in a groupthink séance, in their Basel Committee mutual admiration club!

“Populists”? “We will safeguard your bank systems with our risk weighted capital requirements for banks” As if they knew what those risks were. Sir, can you think of something more populist than that?

@PerKurowski

If the west insists on autocratic regulatory intervention of its banks, then it is not much different from China

Sir, Martin Wolf writes: “The west let its financial system run aground in a huge financial crisis. It has persistently under-invested in its future. The west needs rejuvenation. It cannot rejuvenate by copying the drift towards autocracy of far too much of today’s world. It must not abandon its core values, but make them live, once again. It must create more inclusive and dynamic economies” “The challenge of Xi’s Leninist autocracy”

Indeed, but what that west in which we used to sing psalms like “God make us daring” has done, is to allow autocratic regulators, with their risk weighted capital requirements for banks, to put the natural risk aversion of our bankers on steroids.

If we do not allow our banks to compete freely without this type of autocratic intervention we are not that different from China.

Sir, frankly, does the west really need to allow its banks to earn higher risk adjusted returns on equity when lending to sovereigns, or to AAA rated, or on house mortgages, than when lending to its SMEs and entrepreneurs? I would have to say “NO!”

@PerKurowski