Harmonizing also carries its risk

Sir Francisco González is most probably a great banker and I suppose he can tell us a lot of “What banks can learn from this credit crisis” February 5. Unfortunately both he, as a banker, and just as the regulators are, find themselves to close to the trees to see the full forest.

For instance when Gonzalez speaks in favour of more harmonization it sounds oh so sweet, but I shiver, because history has told us that humans run almost the same risks of harmonizing around good ideas than around bad; and so the expected result of it all is less volatility…until a very big bang. Exactly the same way we got into our current mess…credit rating agencies were doing well, we left down our guard, and to the floor we went, knocked down with some really crazy prime rated subprime mortgages.

As I see it the only financial regulations that really works is to install the continuous questioning of it all, and to but your eggs in as many baskets as possible; even though a Mr González running a super-basket may not particularly like it.

González consoles us with “the good news is that the crisis has exploded during a phase of robust global economic growth and before it could produce long-lasting damage”. Yes, let us all pray that he is indeed right, but never without forgetting that this could just as easily have happened under much more dire circumstances.

Though be careful with any incest

Sir, in “Such devoted sisters”, March 1, where you discuss the relations between the World Bank and the IMF and sort of imply that it would be good if they spoke with “one voice”, I would like to remind you though about the possibilities of incest. Those two organizations are designed to pursuit very different agendas, which by nature are often in conflict, and so their role is to debate all the issues openly, laying out the pro and cons, instead of shutting them up in the name of any harmonization gospel.

For instance, each credit risk avoided by any commercial bank as a result of the regulations coming out of Basel, something that could be viewed favourably upon by the IMF since it has the avoidance of a bank crisis high up among its objectives, could and should perhaps be regarded with utter suspicion by the World Bank, since it could also have been a splendid development opportunity lost.