Why refer to “cash repatriation” when you know it is not cash? Are there some should-not-be-named motives for it?

Sir, Gillian Tett writes: “Mr Trump will need widespread Republican support if he wants to enact his promised tax reforms, cash repatriation or $1tn infrastructure spending plan.” “Trump’s stealthy deregulation delights business” March 3.

“Cash repatriation”? When will Ms. Tett, like most other discussants of this, understand that we really should not be talking about “cash repatriation”. All those exiled profits, or at least 99,99% of these, have already been deployed in assets different from cash under the mattress. These assets to be repatriated might indeed already have been repatriated, like if for instance they are held in bonds of the sovereign to which the repatriation takes place. 

So, to refer to “cash repatriation”, can only feed the illusion that this would signify a fundamental way to correct for the world problems, like that of growing inequality. Under some circumstances, if the redistribution recipients exchange inefficiently those repatriated assets, it could in fact worsen some of our problems.

Sir, now why would some like to feed such “cash-repatriation-is-a-solution illusion? You tell me!

Does this mean that I am against the repatriation of assets booked abroad as a result of corporate profits? Of course not! If there is where these, by law or by incentives should go, that’s how it should be.

@PerKurowski

Though redistribution profiteers believe it and demagogues want you to believe it, there are no “huge piles of cash”

Sir, the word “cash” appears 8 times in Eric Platt’s “US tech cash pile soars to $504bn as groups seek to avoid tax hit on profits” May 21. And huge cash piles are referenced to in terms of “companies hoarding cash”. 

All as if it was some cash stacked away under some mattresses. Its not, there might not even be a single dime of cash; most and perhaps all of it has already been deployed to do something; it might be invested in shares or bonds, perhaps even in long-term municipal infrastructure bonds  J   

And so what should these “cash hoarders” that currently do not want to take investment risks do? 

  

Why do not bank regulators start with ending their risk-weighted capital requirements, those that effectively tell banks not to take risks but to keep it safe?

Sir, the truth is that legions of dumb redistribution profiteers searching for business opportunities, believe there are plenty of Ali Baba caves to be found.

And the problem is that demagogues and populists, like our Chavez and yours whoever, use that to further their own causes. FT, stop collaborating with them!

@PerKurowski ©

The most important investors for the economy of tomorrow, are those who act on its margin, like SMEs and entrepreneurs.

Sir, Martin Wolf writes: “Because corporations are responsible for such a large share of investment, they are also, in aggregate, the largest users of available savings”. And he lashes out at corporations for not doing enough investments. “The corporate contribution to the savings glut” November 18.

Yes, corporations are the largest users of available savings, but that does not mean they are those who move the investments on the margin. Those most important, on the margin investors, are those tough risky risk-takers we need to get going when the going gets tough. And those are the ones who have their fair access to bank credit blocked by the credit risk weighted capital requirements for banks… since banks will always preferentially access to assets against which it has to put the least of its own equity for… especially in times of scarce regulatory bank capital.

I know that Martin Wolf does not understand or does not want to admit the distortions in the allocation of bank credit that credit-risk weighting regulation does, but that does not make it one iota less distortive.

PS. Amazing. Martin Wolf even suggests we should think about taxing retained earnings to force corporations to invest and not of getting rid of those regulations that block the access to bank credit for investments. Much of that corporate cash is in banks and in the unproductive "safe havens"

@PerKurowski ©

It is truly sad when financial journalists don’t care about asking the regulators… "What is the purpose of our banks?"

Sir, Gillian Tett, referring to swelling corporate cash, caused because of relatively low investments, writes that 56 percent of it is sitting in bank deposits accounts, among other because “nobody can think of anything better to do”, “The economy is infested with zombie corporate cash” August 16.

That should not be her or our main concern. What we really should worry about is what banks are doing with those deposits… like are they doing something productive, like lending to SMEs and entrepreneurs? That they don’t, only because regulators require them to hold much more of scarce bank capital when doing so. What regulators are de facto telling the banks is “lend the money to the governments, because that is what requires you to hold least capital”.

It is sad when regulators do not define the purpose of those they are to regulate, it is sadder when those who should ask regulators “why don’t you” don’t even care to ask.

How about asking the Basel Committee "Is lowering the borrowing costs for the governments the real purpose of our banks?"

@PerKurowski

The problem is that regulators, behind our backs, empowered an AAArisktocracy to have special access to bank credit.

If we tax and redistribute all wealth, what shall we do the morning after the party? That question, which could be asked to Piketty, is similar in nature to the question we could make to John Plender, “The corporate aristocracy holding out against fiscal revolution” March 3.

Mr. Plender After getting rid of all that corporate cash by paying dividends, by paying taxes or by building private bridges to nowhere, then what?

Also, all that cash is not just forgotten cash lying under a mattress. Plender himself even mentions that “the corporate sector… in several big economies… now acts as a net lender to governments” which means, that the government already uses those funds, perhaps even paying negative interest rates on these.

Current regulations do not allow bank credit to flow in a fair way to those “smaller companies, which innovate and create jobs”, only because they are perceived as “risky”. That is why the liquidity coming from QEs is trapped, and blows bubbles around already existing assets. But Plender, like many others, just does not want to see this…I wonder why?

What “corporate aristocracy”, what we have is an AAArisktocracy that has been appointed by regulators as those who really merit bank credit.

PS. I have for many years argued that when corporations pay taxes, they dilute the citizens’ tax representation. And that is why when Plender writes that in the US corporate taxes were down to 1.6 percent by 2013, my first impulse would be, bring it down to zero now and save yourselves a lot of expensive economic and political distortions.

PS. Also, as a shareholder, in these times of possible extreme volatility, I do not like to hold shares in any company that has not hoarded ample reserves of cash… to fend off threats or to capitalize on opportunities

Anyone knows in what those “targeted corporate cash piles” are currently invested in?

Sir, I refer to Ferdinando Giugliano’s “Corporate cash piles targeted in hunt for growth”, February 10.

It is hard to undersand all the implications of for instance taxing those cash piles, if you do not really know in what those cash piles are currently invested in… because one thing is for sure, that cash is not really cash under some corporate matrasses… Who knows, they could even be invested in public debt at negative rates. And that would of course require a rethink of the whole issue.

If government actions induces the mobilization of all those $3.5tn in cash reserves held by non-financial companies in the world that Giugliano writes about, that sure sounds like a large wave you would want to keep a very close eye on.

Why should companies be banks and banks not? The real challenge for the European Commission

Sir, I refer to Sarah Gordon’s “Juncker’s plan needs companies to open up their healthy coffers” December 30.

And I ask why should companies turn into banks? Why should companies finance “Europe’s younger and smaller firms which, research suggests, create a disproportionate number of new net jobs”.

What’s wrong with banks financing these? And as banks would were it not for the credit-risk-weighted capital requirements for banks, which create such real hurdles for banks when financing what is perceived as “risky”… and this even though those “risky” could signify the safest way out of the crisis.

Who is going to stop the frankly idiotic bank regulations coming out of the Basel Committee? That would be the real challenge for the European Commission. 

Europe, why should chief executives of businesses with cash on hand take risks when banks are officially paid not to?

Sir, Sarah Gordon quotes Chris Gentle with: “Who is owning the growth agenda? It should be chief executives, but they have not been rewarded recently for taking risks. The danger is that Europe will lose competitiveness in the long term?”, “Europe shuns growth in favour of ‘safety first’” September 15.

What’s strange about that? Why on earth should chief executives of businesses with cash surpluses invest and take risks when banks, those who should be the forefront in financial intermediation, are officially ordered not to take risks.

Europe, for some decades now, has actually paid its bankers to avoid risks, by allowing them to earn much higher risk adjusted returns on equity on exposures officially deemed as safe like to infallible sovereigns, the housing sector and the AAAristocracy than on assets deemed as “risky”. And of course that stalls any economy.

Financial Times, what would happen if you had to charge those you do not like five times more for FT than those you like?

Sir, “what on earth can anyone do to get loans flowing to small business”, asks Gillian Tett in “Big corporate cash piles can help fund small businesses”, February 8. (Since I have explained it to her in so many letters, I might soon think she has a fundamental problem in understanding, and give up on her, but, since I am a very patient teacher, here it goes again.)

Tett argues that some economists blame the decrease in bank lending to small businesses on “tighter capital rules”, This completely fails to describe the argument correctly. The problem is “tighter capital rules” for banks when lending to the small businesses than when lending to what is perceived as much less risky.

What happens now is that a bank can leverage its capital with the net expected margins produced by “The Infallible” much more than what they can leverage those same margins when lending to “The Risky”. For instance Basel II allows a bank leverage of 62.5 to 1 when banks lend to someone with an AAA to AA credit rating, but only 12.5 to 1 when lending to for instance a small business without a rating.

And so when Tett writes “if the capital adequacy rules we loosened, banks themselves would provide loans to small companies” she ignores that what really needs to happen is that capital requirements on “The Infallible” must be brought to the same levels as those of “The Risky”. That is the only way to eliminate what from all points of view is simply a distortive, stupid and odious discrimination against those already discriminated by banks and markets on account of being perceived as “risky”.

In fact that discrimination is something akin to the Financial Times being forced by some authority to sell FT at a price which is FIVE times higher for the readers FT does not like, or know, than the price it normally charges its “friendly FT readers”, and all this according to what some few officially empowered “Worthy of FT´s friendship” raters rate. Would not some FT subscriptions simply disappear?