If Martin Wolf wants to help the poor at the bottom, why does he not help me arguing for getting rid of the risk weighted capital requirements for banks?

Sir, Martin Wolf, morphing into an activist, describes the Republican tax plan as “a determined effort to shift resources from the bottom, middle and even upper middle of the US income distribution towards the very top, combined with big increases in economic insecurity for the great majority”, “The Republican tax plan built for plutocrats”, November 22.

But, since Wolf refuses to discuss the distortions caused by bank regulators, let me here ask him, in quite similar terms: What is the risk weighted capital requirements for banks if not something that stops the “risky” bottom, middle and even upper middle of the US income distribution, from accessing those opportunities of bank credit that could help to propel them upwards?

Day-by-day it is becoming clearer to me that Martin Wolf is just another statist that thinks it is just great that sovereigns are 0% risk weighted and unrated citizens 100%.

I agree of course with Wolf in that “the reductions in corporation tax will [not] lead to a big rise in business investment”. But that, among others, is precisely because the regulators have seriously damaged one of the primary transmission channels of freed resources, namely bank credit.

What is not clear to me though is to what Wolf refers to when arguing that the rich will benefit more from tax cuts. Does he mean in paid US$ in taxes? Because if so I would say it is quite natural that anyone who is paying more $ taxes will pay less taxes when taxes are cut.

We read: “In the more cautious Senate version, households with incomes below $75,000 would be worse off.” Does Wolf want to imply these would now have to pay more in taxes? If so, I am totally on his side on this issue… but I sort of doubt that. $75,000 sounds like a quite normal civil service salary, and you usually don’t go after you own, on any side of the aisle.

@PerKurowski

Health Transformation Alliance should do America a favor and also represent all those not insured.

Sir, Rana Foroohar writes: “America has a healthcare market that … has almost no price transparency… is controlled by vested interests (doctors, pharmaceutical and insurance companies) who exert monopoly power against the businesses and consumers they are supposed to service, and is highly fragmented and inefficient.” That results in “that healthcare in the US is the most expensive in the world by about 5 percentage points of gross domestic product” “Employers can help fix American health” March 20.

Foroohar quotes James C Capretta with: “The system would work a lot better if all of us could put pressure on doctors and insurance companies to provide more transparency.”

Absolutely. But I have argued that legislators could also provide much help by simply decreeing that, even though health sector suppliers are to be totally free to fix the prices for their services and products, they should not be allowed to use prices that discriminate excessively.

About a decade go I remember thinking: “If when needing medical services I could be sure being charged the same as my insurance company is, I could almost do without an insurance. What I really cannot do is to expose myself to being billed as an unprotected uninsured Per Kurowski.”

So it could be of great help the Health Transformation Alliance to which Foroohar refers, would, to their 4m employees, manage to add the representation of all the uninsured. That could signify much more for the American health sector than any of all other health and insurance plans being discussed in Congress.

Sir, in the health sector insurance companies is like the insured’s lawyers. But just like those who cannot afford lawyers are given legal assistance, the uninsured also need someone to defend them. 

PS. Here is what I wrote on this to FT back in 2009, when Obama-care was being discussed.

PS. And here what I wrote in 2007

PS. Sir, think of it, if Health Transformation Alliance negotiate only on behalf of its 4 million employees then those that are outside of it all, will find prices even higher.

@PerKurowski

How much of the “productivity” of robots is derived from the fact these are not burdened by as much taxes as humans?

Sir, you write: “A direct tax on robots is not the answer… It makes no sense to penalise technological innovation that raises productivity and creates wealth. Indeed, any rich country that makes automation too expensive risks driving its manufacturers away to lower wage jurisdictions”, “Robot tax, odd as it sounds, has some logic”, February 21.

Indeed, but why does it not work for you the other way around? I mean in that sense human workers are also “penalized” in many ways, like with payroll taxes, and jobs driven away to lower wage jurisdictions.

So, in order to more efficiently allocate labor/capital resources, robots and similar automation should also generate payroll taxes.

You also hold “the bigger question is how policymakers can use the tax system to ensure that growth is more evenly shared”. And there I have my doubts. If you are going to tax robots only to increase the franchise value of the redistribution profiteers, I am not with you at all.

I much prefer all those revenues to become part of the funding of the Universal Basic Income that is needed, in order to be able to better face that structural unemployment to which I referred to, in 2012, with my “We need worthy and decent unemployments”.

PS. Anyone searching on this issue for “robots” on my TeaWithFT blog should be able to determine, just like in the case of “risk weighted” capital requirements for banks, that I have de facto been censored by the Financial Times. Do you feel proud about that Sir?

@PerKurowski

If those with good “3bn biochemical letters of human genome” ask insurance companies for rebates, what about the bad?

Sir, in screaming silence I read what Clive Cookson writes about “technologies advancing at extraordinary speed to make possible ultra-precise manipulation of the genome” “Engineered evolution takes another step forward” January 18.

In March 2000, after reading “the government plans to allow insurance companies to use DNA testing to assess whether people are at risk of inheriting serious illness and should pay higher premiums”, I wrote an Op-Ed titled “Human genetics made inhuman”.

In it I expressed many of the concerns about the discriminatory implications of DNA mapping and expressed the view that something needed to be done before any release of DNA information caused irreversible damage. I there suggested “that all insurance companies design a plan which obligates them to issue policies for all of those who undertake a genetic examination. This policy should cover the negative impact and consequence that could arise from anyone getting access to such information.”

But I also admitted: “I know this is only a Band-Aid, but what else can I do? I am not among those that resign and lie down to cry, even though this matter actually would justify just that.”

Now, 17 years later, I have no idea on whether something, anything, has been done to save humans from a release of the information contained in a “DNA sequencing, which reads out all 3bn biochemical letters of an individual human genome [and which can be done] in a few hours for less than $1,000”.

Sir, I ask, if with only $1,000 investment, I can get a test testifying I have a good DNA, and which perhaps allows me to for instance negotiate special favored rates with an insurance company, how will that affect those whose tests indicate a not so good or even a very risky DNA, something that in fact could include me or the ones I love?

Environmental challenges, 1st class robots, 3rd class robots, intelligent artificial intelligence, dumb artificial intelligence, terrorism, nuclear weapons, fast and cheap DNA testing, crazy bank regulators, structural unemployment… and the list of challenges goes on and on. How will a world that spends so much of its very scarce attention span glued to so very attractive juicy fake/irrelevant news stories cope?

@PerKurowski

Trump should make certain that “risky” Main-Street borrowers, like he, are invited to Basel, Davos or a Dagenham.

Sir, Robert Shrimsley writes: “the Financial Times has learnt the sensational and entirely fictional news that next year’s pilgrimage has been moved from Davos to the rather more earthy and economically deprived location of Dagenham in east London. The move was the brainchild of Sir Nigel Farage, who said it would help the global liberal elite get back in touch with the real world” “A Davos for the Donald — do it in Dagenham, mate” December 2. 

That’s not so farfetched: We have regulators who for the purpose of setting the capital requirements for banks, use risk weights such as: 0% the Sovereign, 20% what is AAA rated, 35% house financing, and 100% for We the People, like SMEs and entrepreneurs. 

Those regulations make it much harder for those who, precisely because they are perceived as riskier, already face great difficulties accessing bank credit. 

Around the world, over the last decade, those discriminatory regulations against have impeded many millions of SMEs or entrepreneurs to have access to bank credit, and if they got it, they have had to pay much more for it, in order to compensate for this unfair regulatory tax. 

I have no specific information about Trump or his enterprises own bank borrowings, but I am absolutely sure that, over the years, he has had to pay millions and millions more in interests to banks, than what he would have had to pay in the absence of these regulations. 

De facto the Basel Committee’s bank regulations represents a wall which impedes all fiscal and monetary stimulus to reach were it should, in order to create a new generation of jobs and move our economies forward, so as these do not stall and fall. 

Obviously “the risky” SMEs and entrepreneurs, have never been truly consulted about their needs, by for instance regulators in the Basel Committee or the Financial Stability Board, much less have they been invited to places like Davos. 

So, if anyone would want to make a reality of moving “Davos to the rather more earthy and economically deprived location of Dagenham”, the guest list should be much revised, and Dagenham marketed as “The best access to Main Street and the real economy” 

If Trump would then appear in a Dagenham, to speak out on behalf of “the risky”, then perhaps the whole world would learn to appreciate the fact that there are conflicts of interests that can be truly helpful… and should perhaps even be nurtured. 

Sir, I can almost already hear Trump shouting out: “Basel… tear down that wall!” 

@PerKurowski

Elizabeth Warren, as a member of United States Senate Committee on Banking, might not perform entirely her own duties

Sir, Barney Jopson reports that Senator Elizabeth Warren is requesting the replacement of Mary Jo White as Chair of the Security and Exchange Commission “Warren wants SEC head fired for ‘undermining’ administration” October 15.

I have no opinion on how Mary Jo White has been performing her duties at the SEC but, the United States Senate Committee on Banking, Housing, and Urban Affairs, of which Ms Warren is a standing member, is lacking carrying out in its own responsibilities.

I hold that since to this date I have not seen any effort on part of that committee to ascertain if, and if so how much, the risk weighted capital requirements distort the allocation of bank credit.

This is not a minor issue. For a starter it could ask bank regulators for a full explanation of the risk weights of 0% when financing the sovereign (the King), 20% the AAArisktocracy, 35% housing and 100% “We the People” like SMEs and entrepreneurs, those with the best chances of generating the future jobs our grandchildren need. That regulatory credit risk aversion, layered on top of whatever risk aversion the bankers’ themselves can harbor, sounds as anathema as can be to the whole notion of the Land of the Free and the Home of the Brave.

Besides, the discrimination in access to bank credit that those risk weights produce, violates directly the spirit of the Equal Credit Opportunity Act (Regulation B). In that respect the committee should also ask the Consumer Financial Protection Bureau, CFPB, what it is doing about this.

With regulations, to favor banks lending to the “safer” past and present, over lending to the “riskier” future, is a clear violation of that holy social inter-generational bond that Edmund Burke spoke about.

To top it up, those risk weighted capital requirements do not serve one iota for making the banking system safer. All major bank crises result either from unexpected events or from excessive exposures to something erroneously perceived as safe, never ever because of excessive exposures to something ex ante perceived as risky.

PS. Elizabeth Warren, in as much as she classifies herself as a progressive, could also be interested in how these regulations decree inequality.

@PerKurowski ©

Basel’s risk weighted capital requirements for banks, a de facto capital control, blocked bank credit globalization

Sir, Martin Wolf writes: “The financial crisis brought with it regulatory measures, many of which are bound to slow cross-border financial flows”, “The tide of globalization is turning” September 7.

Again Wolf ignores what was there before the financial crisis, namely the risk weighted capital requirements for banks. That piece of regulation favored awarding bank credit to the “safe”, the rich, houses, the developed, the government or anything else that could be perceived, decreed and concocted as safe; and thereby de facto disfavored awarding bank credit to the “risky”, the poor, job creation, the undeveloped and the non AAArisktocratic private sector.

That is an effective capital control that was bound to slow cross-border financial flows.

Before I became a sort of pariah to FT, in a published letter of November 2004, I wrote, “Our bank supervisors in Basel are unwittingly controlling the capital flows in the world.”

And in 2007, at the High-level Dialogue on Financing for Developing at the United Nations, I presented a document titled “Are the Basel regulations good for development?” and which touches a lot on how the risky are discriminated.

So no Mr. Wolf, 28 years after Basel I and 12 years after Basel II, don’t try to put the blame on the crisis and Basel III.

“Globalization’s future depends on better management. Will that happen?” Alas, with media empowered opinion forming dominators like Martin Wolf, I am not optimistic.

@PerKurowski ©

Regulators divided private sector in two, Safe and Risky. And guess who is losing out more than usual? All of us!

Sir, Bill Gross asks: “Why would the private sector… not borrow at practically no cost to invest in a centuries’ old capitalistic model proven to reward risk-taking in the real economy?”, “Central bankers are threatening the engine of the economy”, August 18.

 

In his comments Gross forgets there are now two private sectors. One, perceived, decreed or concocted as “safe”, AAArisktocracy and residential housing, and to whom banks can lend against very little capital; and the one which includes those perceived as risky, SMEs and entrepreneurs, those that regulators require the banks to hold much more capital when lending to.

And so “The Safe”, by allowing banks to leverage more their equity, provides the banks with higher expected risk adjusted return than what “The Risky” can do,

And so regulators decreed that money paid in net risk adjusted margins by “The Safe”, is worth more to banks than that same money when paid by “The Risky.

And so The Risky have been left out in the cold, that is unless they accept to compensate banks for this regulatory discrimination; by paying rates over what their ordinary risk adjustments would justify.

QEs and other fiscal stimuli, or negative interests, finds it hard to overcome this hurdle and reach with bank credit the vital SMEs and entrepreneurs, who might want to borrow, and so most of it gets wasted.

And besides The Risky, we all lose out! It refuses the risk-taking tomorrow’s economy requires be taken by todays’; and all for nothing, because The Risky never cause that type of excessive bank exposures that can cause a major crisis; that dishonor belongs entirely to “The Safe”. 

@PerKurowski ©

“Progressives” can promote fairness and growth by stopping bank regulator’s despicable discrimination against “risky”

Sir, Lawrence Summers writes: “Often in economics there are trade-offs. But not always. We can and must promote both fairness and growth. “The progressive case for championing pro-growth policies” August 8.

And for that he recommends: “more demand for the product of business. This is the core of the case for policy approaches to raising public investment, increasing workers’ purchasing power and promoting competitiveness”

Again Summers seems to ignore completely what one could believe would be a great cause for “progressives”, namely to combat how the last decades those who are perceived as risky, when compared to those perceived as “safe”, have had their access to credit made much more difficult by the risk weighted capital requirements for banks

Who are “the risky”? In terms of growth, the all important SMEs and entrepreneurs, those risk weighted 100% (and more).

Who are “the risky”? In terms of fairness, the weaker, the poorer, the not yet up there, the ones praying for fair opportunities.

So how can we explain that progressives do not give much attention to these regulations that so odiously discriminate in favor of the AAArisktocracy and against "the risky"? Perhaps because these also include the risk-weight of 0% for the government, and most progressives are foremost statist.

Perhaps because it is not in the nature of progressives to understand, and much less admit, that regulators can get it so wrong.

@PerKurowski ©

#BoE #FSB Mark Carney why do you bank regulators discriminate so much against us SMEs and entrepreneurs?

Sir, Mitul Patel with reference to that “The Bank of England’s Monetary Policy Committee will formally meet on Thursday for the first time since the EU referendum result” expresses many valid concerns. “Question marks remain as BoE grapples with monetary policy poser” July 12

But the following question is in my mind of much larger importance:

Mr. Mark Carney, you as the chair of the Financial Stability Board must be well versed on the subject of bank regulations, and so could you please explain to us SMEs and entrepreneurs the following?

We, who are usually perceived as risky, usually perceive much less bank credit and pay much higher risk premiums than those perceived as safe. And so, why do banks, when compared to the capital they need to hold against those perceived as safe, need to hold much more capital against loans to us.

Since banks can then leverage their equity, and the support they receive from taxpayers much more with assets perceived as safe, than with loans to us, we now have a much harder time to provide the banks with competitive risk adjusted ROEs. And so we get even less bank credit or have to pay even higher interest rates.

And to top it up we cannot understand where you all got the idea that banks could build up the excessive and dangerous exposures that could threaten the bank system, with small and high interest rate loans to borrowers like us.

So Sir, can you explain it all for us? Why should our access to bank credit be curtailed? Are we not useful to the real economy?

Thanks,

Will Mark Carney dare to take that question, or will he as I once heard Robert McNamara recommend: “If they make you a question you don’t like just answer the question you wanted to hear”?

@PerKurowski ©

The real UK economy, SMEs and entrepreneurs, need also to be invited to a “fireside chat” with Mark Carney and BoE

Sir, Martin Arnold and Caroline Binham report on the invitation of Bank of England extended to “The heads of the five big UK banks — HSBC, Barclays, Lloyds Banking Group, Royal Bank of Scotland and Standard Chartered — along with a few others including Nationwide and TSB”, in order to have a “Fireside chat” May 29.

The real UK economy should also be invited, so that it is given a chance to ask: “Mark Carney, BoE, when compared to that of SMEs and entrepreneurs, when will bureaucrats stop having preferential access to bank credit?”

Let me explain: The current risk weight of the “safe” sovereign is zero percent, and that of “risky” not-rated citizens 100 percent.

That means banks need to hold much less or no capital at all, when lending to the sovereign, than when lending citizens; which means banks can leverage their equity and the support they receive from society (taxpayers) much more when lending to the sovereign than when lending to citizens; which means banks can earn higher risk adjusted returns on equity when lending to sovereigns than when lending to citizens; and which means banks favor more and more lending to the sovereign over lending to the citizen. And so the SMEs and the entrepreneurs who basically represent the “not-rated citizens” must face harsher relative conditions accessing bank credit, than those that would prevail in the case all bank assets faced the same capital requirements. 

There could be some discussion on whether lending to sovereigns represent less risk than lending to SMEs and entrepreneurs. I do not believe so. Banks do not create dangerous not diversified excessive exposures to SMEs and entrepreneurs; and, at the end of the day, the sovereign derives all its strength from its citizens.

But I doubt the real economy will be invited to the fireside chat… the regulators do not want to hear: “Sir, especially after Basel II introduced risk-weights that also favor the safer of the private sector, the AAArisktocracy; do you know how many million of loans to SMEs and entrepreneurs around the world have not been awarded, only because of your risk weighted capital requirements for banks? Have you any idea of how many jobs for our young ones have not been created as a direct consequence of this?

@PerKurowski ©

Hardheaded bank regulators still believe they’re up against the expected while the real enemy is always the unexpected

Sir, Ben McLannahan discusses the consequences of changing “the current regime [in which] banks can hold off adding to reserves until the point at which losses on the loan become probable…[to one in which] banks will be made to log all expected losses over the life of the loan on day one, based on a combination of experience, their own forecasts and the state of the economy”, “Big lenders raise concerns over new loan loss rules” June 22.

One direct consequence of that is that those borrowers who are ex ante perceived as risky, will therefore force banks to recognize losses earlier than “when probable”. That might sound correct, but the real effect is that, when compared to those ex ante perceived as safe and which have lower probability of losses, it will discriminate against the risky.

And so when you layer this on top of the discriminations already produced by the risk weighted capital requirements for banks, the access to bank credit for those perceived as risky will only become more difficult. And all really without making banks much safer. The expected never causes major bank crises, it is always the unexpected losses for what had erroneously been perceived as safe that does.

McLannahan reports that Hal Schroeder, a board member at FASB, opines that the new rule — known as the Current Expected Credit Loss, or CECL — “aligns the accounting with the economics of underwriting, and the informational needs of investors”.

And to justify it Schroeder “noted that in the four years before the crisis, loans held by banks in the US rose 45 per cent, while reserves set aside for losses fell 10 per cent. That meant that loan-loss reserves as a percentage of gross loans were near a multi-decade low on the eve of the Lehman collapse.”

But why was that? That was the result of banks increasing their exposures to what was perceived as safe, because of lower capital requirements, and lowering their exposures to what was perceived as risky, because of lower capital requirements… and then being surprised when “super-safe” AAA-rated securities, backed with “super-safe” residential housing mortgages, and loans to sovereigns decreed as “super-safe”, like Greece, turn out, ex post, un-expectedly, against probabilities, to be very risky.

Sir, what’s being done here, especially without eliminating the risk-weighted capital requirements, evidences that the regulators still don’t understand that they are not up against the expected, their real challenge is the unexpected. Since what is perceived as safe has much more potential of providing unpleasant surprises than what is perceived as risky, their regulations just makes the bank system more brittle and fragile.

And to top it up by discriminating against the risky they hinder the banking system from taking the risks the real economy needs to move forward.

We need our banks to work for all, not just for the banks, and for those perceived as safe.

We need our banks to finance the riskier future of our young, not just refinancing the safer past of their parents.

@PerKurowski ©

Bank regulators, with their discrimination against “the risky”, decreed lower social mobility.

Sir, Sarah O’Connor writes about “Relative mobility…whether you end up on a different rung of the income or social ladder from your parents” “If we want poor kids to succeed, then more rich kids must fail” May 8.

My impression is that the findings she refers to, that so many on the top of the ladder keep on being on the top of the ladder, might be affected somewhat by survivorship bias. I am sure that an immense number of the descendants of those who centuries ago were up on the top have now descended that ladder.

That said, when O’Connor writes “To boost relative mobility, you would need to unpick… privileges” I could not agree more, especially with respect to entirely artificial privileges. 

The credit risk weighted capital requirements for banks, those that allow banks to hold less capital when lending to the safe “the rich” than when lending to “the risky”, is precisely that kind of hidden privileges that need to go.

For Sarah O’Connor’s benefit let me quote from John Kenneth Galbraith’s “Money: Whence it came where it went” It states: “The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own. And the more casual the conditions under which credit is granted and hence the more impecunious those accommodated, the more egalitarian credit is” 

And so, with their discrimination against “The Risky”, you could easily argue the regulators decreed lower social relative mobility.

@PerKurowski ©

If regulators insist on that any information gathered by banks must be doubly considered, that would be real dangerous.

Sir, Martin Wolf writes: “Finance is an information business. Indeed it already spends a higher share of its revenues on information technology than any other. It seems ripe for disruption by information technologies. Consider its three essential functions: payment; intermediation between savings and investment; and insurance. All these activities are information-intensive.” “Good news — fintech could disrupt finance” March 9.

Banks already perceived information about credit risks, and cleared for it with interest rates and the amounts of their exposures... and they were not doing that bad when it came to identify “the risky”, where they sometimes really failed, badly, was when they identified some as very safe.

But then came the regulators and told the banks they also had to consider the same perceived risks in the capital. And so banks did doubly stay away from the risky, and doubly fall into the traps tended by the false safes.

And so if all that information is going to be of value for the banks and for us, be sure to keep the regulators away from it.

Martin Wolf also quotes John Kay on that “parts of the financial sector today . . . demonstrate the lowest ethical standards of any legal industry”.

Not so. Compared to the ethical standards of regulators who abusing their powers distort the allocation of bank credit to the real economy; and by discriminating against the opportunities for fair access to bank credit of “The Risky” increase inequalities, one could argue that bankers are saints.

@PerKurowski ©

There are social leftwing reformers and statist leftwing reformers. In banking currently only the latter exist.

Sir, John Dizard, referring to Senator Bernie Sanders and Senator Elizabeth Warren writes “The US financial industry should listen to leftwing reformers” December 7.

Frankly, if by leftwing he refers to someone defending the small and poor, then I do not know of any real leftwing reformer. John Kenneth Galbraith in his “Money: Whence it came where it went” 1975 wrote: “The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own. And the more casual the conditions under which credit is granted and hence the more impecunious those accommodated, the more egalitarian credit is… Bad banks, unlike good, loaned to the poor risk, which is another name for the poor man.”

And current credit risk weighted capital requirements, to which I have heard none from the supposedly left raise objections, hinders precisely “the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own.”

And, it is only going to get worse. That “Fed’s total loss-absorbing capacity… will require an estimated additional $120bn in equity and debt” Dizard refers to, that one is also based on credit risk weighted assets.

But of course, if it is leftwing reformer as in being statists, then they must be plentiful of them, as very few have raised objections to that in 1988, with the Basel Accord, the risk weight of sovereign (government) was set at zero percent, while the risk weight for the private sector was defined as 100 percent.

No Sir, whether leftwing or rightwing, I would not like to have anyone who fails to state in very clear terms what he believes to be the purpose of the banks, and I agree with that purpose, to have anything to do with regulating banks.

@PerKurowski ©

A pro-regulation mindset blinds leftwing economists from understanding how anti-egalitarian bank regulations are.

Sir, Gillian Tett writes “Rightwing economists tend to blame government regulation for lower growth” and since she does clearly not think so, I guess she identifies with the left, “A puzzle Yellen cannot solve with a rate rise” December 4.

I blame regulations for lower growth and especially the credit-risk weighted capital requirements for banks that distort the allocation of bank credit to the real economy.

Favoring bank lending to what is perceived as safe de facto discriminates against the fair access to credit of those perceived as risky. And so inasmuch as it fosters inequality, and inasmuch as the left professes to hate inequality, leftwing economist should also oppose that regulation.

In “Money: Whence it came where it went” 1975: John Kenneth Galbraith, wrote “The function of credit in a simple society is, in fact, remarkably egalitarian. It allows the man with energy and no money to participate in the economy more or less on a par with the man who has capital of his own.”

The problem with leftwing economist is that their mind set is so pro-regulation they cannot fathom regulators doing any wrong, and also so against the bankers, that they blind themselves to that credit-risk weighing is as anti-egalitarian as regulations come.

@PerKurowski ©

Amazing! Simon Kuper calls a zero risk weight of government and a 100 % for the private, a “right’s cult of free markets”

Sir, Simon Kuper writes: “the right’s cult of free markets was the last surviving big idea. Then the financial crisis of 2008 killed it off almost everywhere outside the US Republican party.” “Small ideas are better than big ones” October 24.

That is simply not true. If we are going to talk about the biggest current idea, and that has been applied on a global scale, I would say that is the credit-risk weighted capital requirements for banks, an idea concocted by the Basel Committee. And its origin, the Basel Accord in 1988, set the risk weights for loans to governments at zero percent while the risk weight for loans to the private sector were set at 100 percent.

That BIG IDEA, discriminating with regulations against the citizen and in favor of the state, has survived the financial crisis, and is still up and running strong in Basel III 

If anything, the Basel bank regulations should be called, the product of a “left’s cult of controlled markets”.

PS. Of course small ideas are always better than big dumb ideas. 

@PerKurowski ©

John Kay: A progressive business tax in UK, based on £ rent per square foot of space?

Sir, I read with much interest John Kay’s “A nation of shopkeepers in need of new ideas on tax” October 14.

Might he have a progressive business tax, based on £ rent per square foot of space, in mind?

In a way that would help to correct for inequalities derived from unequal growth rates around the country.

In a way that would help to correct for instances the inequalities derived from QEs and similar liquidity injections that tend to benefit more some assets than other.

When I studied to obtain a real estate sales and mortgage advisor license in Maryland US, primarily interested into getting to know more about how the subprime disaster had happened, I was surprised to see that the Federal Housing Administration, FHA, would guarantee a one family mortgage in Montgomery County, Maryland for $625,500, while for instance only US$ 271.000 if that home was in Hattiesburg, Mississippi.

Can you imagine if a Eurozone FHA did the same in the case of Berlin and Athens?

That is another example of how authorities, instead of remaining neutral, reinforce market perceptions and valuations.

@PerKurowski ©  J

“What technology can do for your health”, besides very good things, might also include some very bad things

Sir, I refer to Gillian Tett’s “What technology can do for your health” October 3.

The only problem I have with the article is how she brushes over the problem of privacy: “To be sure there are issues of data privacy; and sometimes records get lost. But…”

In March 2000 I wrote an Op-Ed in Venezuela titled “Human genetics made inhuman” and in which I expressed concerns about how medical data could be used to make it more difficult for some to obtain health insurance.

That was before I really began to understand how data was so massively been put to use in so many aspects of our lives… and not always even correct data.

What would Gillian Tett say if one of her health record entrepreneurs, by means of an innocent mistake, entered a data that for instance hindered one of her children to enter a university that had decided that the expected longevity of students was good for its funding drives?

@PerKurowski

Sir FT, who is more likely to engage in predatory bank regulations, men or women?

Sir, I have some questions to you in reference to Brooke Masters’ “Women regulate banks run by men” in Your FT Special Report on Women in Business of September 15.

An audit report from the office of inspector general of the FDIC broadly defines predatory lending as "imposing unfair and abusive loan terms on borrowers”. Since current risk-weighted capital requirements for banks cause additional discrimination against borrowers deemed as risky, this could also be deemed as predatory regulations.

So Sir, who do you believe is more likely to engage in such regulatory deviances, men or women?

Who is more likely to understand that those financial excesses that can endanger banks is not built with what is perceived as risky but what is erroneously perceived as safe, men or women?

Who is more likely to understand that the cost of introducing such risk-adverse regulations that cuts off bank credit to SMEs and entrepreneurs will be paid by future generations, men or women?

Who is more likely to understand that this sort of discrimination can only increase whatever inequalities exist, men or women?

And when finally understanding how stupid these current Basel Committee regulations are, who is most likely to say “sorry”, and then rectify, men or women?

Sir, just to make it clear, I do not hold any clear opinions in this matter… I am just asking about yours... do you dare giving it? 

@PerKurowski