Many or perhaps most of our bankers would be much better off, at least happier, if they heeded George Bank’s “Let’s go fly a kite!”

Sir, John Gapper refers to “Two academics who studied investment bankers in London were surprised by their degree of cynicism and noted the absence of ‘meaningfulness, emotions and personal investment in work values’. “Bankers have been alienated from their jobs” July 11.

Call me a romantic if you want but, I know that when bankers who felt proud of being savvy loan officers were, with the introduction of the risk weighted bank capital requirements, pushed aside by equity minimizing and leverage maximizing financial engineers, there had to be a lot of frustrations.

Imagine if you as a loan officer had analyzed in depth the plan an entrepreneur presented in his credit application; and you had gotten to know him well; and you had agreed on a risk adjusted interest rate that made sense for both of you, and then your superiors told you: “No we can only leverage our equity 12.5 times with this loan so you either get him to accept a much higher interest rate, or we’re not interested”… and you knew that higher interest rate doomed the viability of the project? Would you not then feel like our beloved George Banks, that you’d better go and fly a kite?

Sir, most of those who became bankers during the last three decades must have a very hard time understanding what “It's a Wonderful World" is all about.

@PerKurowski

A Universal Basic Income would allow many at least some human time, so as not having to be full time androids.

Sir, Leslie Hook writes about Uber drivers having to work 24 hours a day, and feeling like androids, “FT Big Read. Uber: The view from the driving seat” October 5.

I have talked with many young bankers and heard they also, just like Uber drivers, feel a bit like androids; having just to automatically fill in many pre-ordained formulas, mostly just in order to reduce bank equity requirements, and never ever getting the chance of that so fulfilling opportunity of asking a client, “What do you intend to do with the money?” and thereafter deciding on whether recommend the credit or not to their superior.

But what can we do about it? Perhaps a Universal Basic Income would at least allow us to be half-time androids and half time humans.

What comes thru loud and clear from the article though is that we need lots of Uber and Lyft competing for our android services. Imagine being an android and having to serve a not too intelligent high-tech monopoly? That has to be as bad as it gets… sort of.

And of course we need new bank regulators.

@PerKurowski

Going up the mountain is going north, going down is going south, and west or east doesn’t matter, anyway around it.

Sir, Gillian Tett writes of “some fascinating studies by neurologists, for example, which suggest that when people rely on GPS to navigate, they stop interacting with their environment in a cognitive sense, and their brains appear to change.” “We’d be lost without GPS”

Yes, young people nowadays have no idea about a compass or what north and south is. If you by chance have a person under 15 in your car when you go up or down a hill, do the following experiment: Tell them “See we are now going north (or south)” and you will be amazed about how easy they swallow that.

But, being on this theme, we should also ask neurologists to study the brain of bankers to see how it has changed when, following the instructions of the Basel Committee, they transitioned from the “know your client” to the “read his credit rating” 

The GPS and the AAAs 

PS. Many cellphones have a compass app. Teach your kids how to use it, and keep a real compass at home  J 

@PerKurowski ©

What´s banker´s bonuses got to do with it?

Sir, Sharon Bowles, the Chair of the Economic and Monetary Affairs Committee of the European Parliament writes: “We know from bitter experience that the size of bonuses induced overly risky behavior and the peddling of poorly understood products contributed significantly to the financial crisis”, “Bureaucrats are not behind bonus cap proposal”, March 7.

Wrong! Being able to extract some investor value, like an AAA rating, from something not at all that valuable, is a normal financial operation, which often provides benefits to all parties involved.

The problem this time was that the appetite for what detonated the crisis, the securities collateralized with mortgages to the subprime sector in the US, just went crazy, when suddenly banks were allowed, by their regulators, to hold these securities against only 1.6 percent in capital, only because they had an AAA credit rating, issued by some human fallible credit raters. An authorized mindboggling leverage of 62.5 to 1!

No one, except those receiving them of course, likes runaway or not merited bonuses. And perhaps governments should cap the tax-deductibility of bankers’ annual pay. But, to read, five years after the crisis detonated, bureaucrats believing that fixing banker´s bonuses problem should have a high priority that is truly saddening.

The EP should concentrate instead on eliminating how regulations favor so much bank lending to “The Infallible” and thereby discriminates against “The Risky”, and thereby creating huge distortions in the real economy, because that is what is really taking Europe down… and fast.

The EP should also ask itself whether is wise to keep on consulting with bank regulators which by any accounts should have been fired long ago. Hollywood would never be so dumb to allow someone who produced a Basel II flop, to go out and try Basel III, with the same scriptwriters

PS. To help EP better connect the dots let me remind it that when banks lent to Greece, they were also allowed to leverage 62.5 times to 1; and also that nothing perceived as “risky” has ever created a major banking problem, only Potemkin Infallible do that. Capisce?

Stop your fixation with bankers’ bonuses tree, and look at the forest of misallocated resources instead

Sir, I agree with much of what Andrea Leadsom writes in “Britain must do whatever it takes to nix the bonus cap”, March 5. 

That said I wish he and you would all stop focusing on the trees and look at the forest instead. Much worse than unmerited bonuses are all those missed opportunities and misallocated resources which result from the current bank regulators having concocted dumb capital requirements for banks which favor “The Infallible”, those already favored, and thereby additionally discriminate against “The Risky”.

Sadly there is no way to clawback missed opportunities and misallocated resources

Sir, Patrick Jenkins argues a lot on the benefit of “clawback” in “The time has come to rehabilitate bankers’ bonuses” March 5. And of course, intelligent “clawback” of bonuses is much welcomed, especially for the shareholders who otherwise need to foot the full bill.

But, for the society as a whole, much much worse than unjustified paid bankers’ bonuses, are all those missed opportunities and misallocated resources which have resulted from the current bank regulators having concocted dumb capital requirements for banks which favor “The Infallible”, those already favored, and thereby additionally discriminate against “The Risky”.

And sadly, there is no way to “clawback” that. It is even worse, in this case the regulators do not even want to recognize their mistake, and instead are set on carrying on business as usual.

Limit how much of annual payments to a banker are tax-deductible expenses

Sir, at the end of the day, somewhere somehow, one bank customer is going to pay for what the banks pay in tax. And so, if you want real transparency, eliminate the taxes on banks, because whoever really ends up paying these should have his full tax representation.

The way you go at it in “Let the sun in on banks’ tax affairs”, February 21, and like so many others go at it, unnecessarily make the banks stand out as villains; and, the publication of “how profits and corporate profits are allocated across countries”, would also unnecessarily breed animosity between the citizens of the world.

But that said, if you cannot do anything about it, because politicians like taxing banks so that they can be lobbied by banks, then at least help to eliminate some distortions. For instance any payments in salaries plus bonuses to any individual banker that exceeds more than £300.000 per year should not be allowed as a tax deductable expense. That would help to cap those banker bonuses in a way that creates much less distortions than other proposals we have read.

PS. Tax-havens are best fought with tax-heavens

Defeatism you can really write home about

Sir, Chris Giles, in “Why Sir Mervyn has taken a walk on the supply side” January 24, considers going for more “supply side” economics and abandoning “demand side” stimulus as something “too defeatist. Frankly, he has no idea of what real defeatism is. 

Mark Twain said “A banker is a fellow who lends you his umbrella when the sun is shining, but wants it back the minute it begins to rain”. The capital requirements for banks based on perceived risk imposed by the Basel Committee's bank regulators only makes real sure that bankers will be ever so more anxious to lend you the umbrella when the sun is shining, and immensely faster to demand its return, as soon there is the slightest indication that it could possibly rain.

And that my friend, that is defeatism you really can write home about.

Let the bankers earn their bonuses, through competition

Sir David Blake goes overboard titling “Why banking’s bonus culture should be defended” July 18. Yes, regulators should not try to micromanage the bonuses but “defend the culture”? No, what is evidenced by the extraordinary gross earnings available for bonuses is that the banks are not operating in a sufficient competitive environment, and much so because of the regulators.

It is the trading of non-transparent instruments in non-transparent markets; and the profitable arbitration of the risk weights concocted by the regulators that help to create those gargantuan gross earnings that need to be distributed. How the bankers and the shareholders then share the almost loot, well that is entirely their business.

We might have been better off with no regulation whatsoever, but while they regulate let the regulators respond to investors, borrowers, and taxpayers for those mind-boggling bonuses paid out to the bankers, or those mind-boggling shareholder value of banks that we have seen the last decade.

A chance for many bankers to be much better bankers

Sir my eldest daughter works for a large Canadian bank and so I have a vested interest in Gillian Tett’s “A chance for banker to refocus their talents” April 7. I have another take on this issue.

If there is one thing to be learned from this crisis is that the world is much better off with hundreds of thousands of credit analysts that get to know and truly understand their clients, look them in their eyes, decide and shake their hands, knowing that though they will be personally accountable for their mistakes they will not risk bringing down the world, as some very few high paid credit analysts in the only three credit rating agencies did.

That these good credit analyst won’t make as much money as their supercharged predecessors is clear but they will have the possibility of earning a decent salary in an interesting and worthy carrier instead of just stupidly staring into their monitors looking at what the credit rating agencies opine.

Understanding how the banks dismantled their credit analysis departments as a consequence of the regulations that emanated from Basel helps you to understand the immense potential for recreating the jobs that were.

PS. Though I have a couple of other individual articles that I favour it is clear that based on the full production Gillian Tett deserves the title of Journalist of the Year. Bravo! That said, as an anthropologist she had perhaps an unfair advantage in these times.

Could we please have our active commercial bankers back?

Sir Evan Salway is right when he urges to "Rethink the 'active versus passive' investment debate" May 15, but much more important is the issue of whether we want active versus passive bankers. I sure do!

Since it is the commercial banker's true societal role to be actively out there in the real world developing his skills in listening and analyzing the many different lending opportunities I feel saddened by seeing the bankers turning into passive credit-rating-agency-criteria followers and automated executioners of trading opportunities identified by computers running models that none of them fully understand.

Banking regulator in Basle...could we please have our active commercial bankers back?

Martin Wolf did right opening the cage!

Sir who could have thought a year ago that we would read Martin Wolf say “Why regulators should intervene in bankers pay”, in the Financial Times, January 15, and agree that he has a valid point; that the system cannot stand to see many franchises of public confidence so savagely exploited by so few. Mind you, on a much different scale, that is exactly how we ended up turning over Venezuela into the hands of an instigator of hate.

Perhaps what we now need is a new layer of progressive taxes specially designed for those who earn more than 100 times the income per capita of the country. The argument seems also applicable to the area of intellectual property rights. When we the society agreed to award patents and invest money defending these so that new inventions would follow, we never did it in order to help the general managers of those patents to earn salaries like hedge funds managers or bankers.

But also what could be most needed, in this case for all, instead of new regulations, is to restore the power of the shareholders since as long as management can decide their own salaries, the market constraints have really not a chance to operate. There’s a fiction making its rounds in the world that the big salary checks are all well deserved and well earned. Who do you think put a spin on that theory?

Give me someone without a conflict of interest and by definition he is a no one.

Sir, William Cohan surprisingly seems to express some surprise about that “Bankers must act to avoid conflict of interest” May 21. Hey, in my country, whichever, everyone knows that everyone with the exception of some shoe-shiners have one conflict of interest or another, and for that matter even shoe-shiners have been seen overhearing an investment tip or two.

What I really find surprising is how the financial sector regulators have been able to convince themselves to believe that their delegated authorities, the credit rating agencies, are in fact able to act free of conflict of interests. Might it be the regulators are so full of it they do not even notice?

I have conflicts of interest at all times (hum, even while sleeping) and what I found is important is to learn to keep them in check… reasonably.