The Fed, surprising banks with visits is ok, but surprising them with surprise regulatory criteria, sounds illegal

Sir, amazed I read Ben McLannahan reporting that “Fed officials say that they want to preserve some mystery in their methods, so that banks stay on their toes”, “Tougher US stress test challenge looms for lenders in round two”, March 9.

Amazing, the Fed is becoming truly Kafkaesque. Who on earth does it believe it is to preserve some mystery in their method which when released might affect all us who invest in bank shares?

If it springs a surprise on the bank I have invested in, and as a result I suffer losses, should I not be able to sue the Fed?

If banks do well but the real economy falls, we will all fall… at the end including the banks. It is as easy as that!

Sir, it is hard for me to get a grip on what John Authers really means with heavily regulated when writing “Banking is complex, and must be heavily regulated”, “Volcker rule is doing its job despite Kafkaesque turns” December 16.

I say this because one single line of regulations, “capital requirements must be 10% of all assets”, would in my opinion be a more comprehensive regulation than the ten thousands of lines that will be derived from Basel III, Dodd-Frank Act and the Volcker rules.

Also, again, as I observed at a 2003 workshop on Basel II at the World Bank, there is still not a word about the purpose of the banks.

If the real economy does well, we will survive any bank crisis. If banks do well but the real economy goes down the drain, we will all fall… at the end, including the banks. It is as easy as that!

And in that respect I can also guarantee that my single regulatory line will distort the allocation of bank credit to the real economy, a thousand times less than the other referenced regulatory concoctions.

PS. The latest version of Basel III, December 2017, in 158 pages still contains no other stated purpose, like e.g., that of allocating credit efficiently to the real economy.

Since Basel has become too one minded to regulate we must break up the regulator too

Sir not only do I agree with Philip Augar and John McFall in that “To fix the system we must break up the banks” September 11, but perhaps we need to break up the regulators too…because Basel has become too one minded to regulate. (It is probably not comme il faut to quote from another newspaper, but it is such a small paper so here I go.)
In February 2000 in the Daily Journal of Caracas, Venezuela, in an article titled “Kafka and global banking” I wrote:
A diminished diversification of risk. No matter what bank regulators can invent to guarantee the diversification of risks in each individual bank, there is no doubt in my mind that less institutions means less baskets in which to put one’s eggs. One often reads that during the first four years of the 1930’s decade in the U.S.A., a total of 9,000 banks went under. One can easily ask what would have happened to the U.S.A. if there had been only one big bank at that time.
The risk of regulation. In the past there were many countries and many forms of regulation. Today, in Basel, norms and regulation are haughtily put into place that transcend borders and are applicable worldwide without considering that the after effects of any mistake could be explosive.
Excessive similitude. By trying to insure that all banks adopt the same rules and norms as established in Basel, we are also pushing them into coming ever closer and closer to each other in their way of conducting business. Unfortunately, however, nor are all countries the same, nor are all economies alike. This means that some countries and economies necessarily will end up with banking systems that do not adapt to their individual needs.
Sir and I hold that I am still right.

And my warnings were silenced by the FT establishment

Sir Dirk Bezemer, in “Why some economist could see it coming”, September 8, argues correctly that many did indeed see it coming but that “they were ignored by an establishment”. FT should know about that.

In February 2000 in the Daily Journal of Caracas, Venezuela, in an article titled “Kafka and global banking” I had written:

A diminished diversification of risk. No matter what bank regulators can invent to guarantee the diversification of risks in each individual bank, there is no doubt in my mind that less institutions means less baskets in which to put one’s eggs. One often reads that during the first four years of the 1930’s decade in the U.S.A., a total of 9,000 banks went under. One can easily ask what would have happened to the U.S.A. if there had been only one big bank at that time.

The risk of regulation. In the past there were many countries and many forms of regulation. Today, in Basel, norms and regulation are haughtily put into place that transcend borders and are applicable worldwide without considering that the after effects of any mistake could be explosive.

Excessive similitude. By trying to insure that all banks adopt the same rules and norms as established in Basel, we are also pushing them into coming ever closer and closer to each other in their way of conducting business. Unfortunately, however, nor are all countries the same, nor are all economies alike. This means that some countries and economies necessarily will end up with banking systems that do not adapt to their individual needs. http://bit.ly/HIi3x

And, in January 2003, the Financial Times published a letter I wrote and which ended with “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic error to be propagated at modern speeds. Friends, please consider that the world is tough enough as it is.” http://bit.ly/5i1Bu

But then, I was shut up by the Financial Times establishment, who had perhaps decided there were only some macro economic problems and not any problems resulting from bad financial regulations, and wanted to hear no monothematic contradictions on that.