The priority of those who committed the mistakes that caused the financial crisis has been the cover up, not the corrections

Sir, Gillian Tett, similarly to like Martin Wolf wrote a couple of days ago, expresses surprise and concerns for the fact that so many things that were supposed to be corrected or at least bettered after the financial crisis seem worse today. She lists the level of debt and leverage, the market share of TBTF banks, the size of the shadow banks, and that no few bankers directly related to the crisis have been jailed. “Surprising outcomes of the financial crash”, September 7.

But how can one be surprised by so few corrections and betterments when those supposed to correct and better it remain being those who committed the mistakes, and have not been held accountable one iota for their mistakes? 

But how can one be surprised by so few corrections and betterments when in the aftermath of the crisis so many truths were classified as those that shall not be named, and consequently arduously silenced, like for instance:

Lack of regulations: Wrong! Total missregulation. Regulators for their risk weighted capital requirements for banks used the perceived risk of banks assets, those that bankers were already clearing for, and not the risk that bankers would perceive and manage the risks wrongly. They seemingly never heard of conditional probabilities.

Excessive risk taking: Wrong! It was the regulators excessive risk aversion that gave banks incentive to build up excessive exposure to what was perceived safe. Like allowing banks to leverage assets a mind-blowing 62.5 times only because some human fallible credit rating agencies had assigned it an AAA to AA rating.

Greece did it: Wrong! EU authorities did Greece in, when assigning a 0% risk weight to its debt. Is the statism implied in assigning a 0% risk weigh to the sovereign and one of 100% to the citizens discussed? No! There are too many interested in benefitting from crony statism for that.

Sir, Ms. Tett ends with “predictions are best presented with a dash of humility — and the knowledge that what does not happen can sometimes be even more significant than what actually does.”

Indeed but since “that what does not happen” could be much a result from a lack of questioning, to understand it could also require loads of humility from journalists. Capisce FT? 

@PerKurowski

FT, you have a fake understanding on what is wrong with current bank regulations, and you have silenced my real one

Sir, Gillian Tett, your US Managing Editor, referring to the responses to an article by her titled “Why a divided America has united against the media”, July 14, strangely published only in that FT Weekend Magazine I do not receive here in Washington D.C. writes: “Readers and viewers say they want the media to be “less biased” and to “focus on the facts” but the problem of how to finance and organise serious non-partisan journalism for the mass market remains largely unsolved. The trouble is that partisan social media is free – and readers seem to be hungry for this. So how can we support real news when most voters keep flocking to entertaining stories that are (at best) partisan and (at worst) deliberately fake?” “Want to change the media? Don’t get mad – get even”, also solely in FT Weekend Magazine, July 22. 

The following is a very brief version of my relation with FT, as an opinionated subscriber.

FT and its columnists, with relation to banks’ crisis and regulations, have consistently written about deregulation and excessive risk-taking.

I on the other hand and in that respect, have with over 2.500 letters to FT consistently written to FT about misregulation and excessive risk-aversion; which results in dangerous excessive exposures against too little capital to what is ex ante perceived as safe, like sovereigns, the AAArisktocracy and residential housing, but could ex-post be very risky; and too little exposures to what is ex ante perceived as risky, like SMEs and entrepreneurs.

As one of the frontlines on this issue of the risk-weighted capital requirements for banks we find that in Basel II regulators assigned a risk-weight of only 20% to what is rated AAA to AA, and that which therefore could be very dangerous, and 150% to what is rated below BB- and that by just that fact alone is ex-ante made so innocuous to the banking system.

In one sentence, regulators regulate the banks based on the ex ante perceived risk of the banks assets, and not based on the risk ex post of the assets for the banking system.

And my criticisms have included many other aspects… like for instance the runaway statism present in the risk weights of Sovereign 0% and citizens 100%.

But for soon a decade, my arguments have been met with absolute silence, because as one of you informed me, I was just obsessed with the issue. Sir, I am reporting on a regulatory bomb that is destroying the future economy for our grandchildren, and you really don’t want me to be obsessed?

Now Tett, one of the frequent recipients of my comments writes: “the next time you complain about the media, ask yourself how you expect “fair” mass-market journalism to be funded and run – and if you are willing to pay for it. That question doesn’t let journalists off the hook: we writers need to dignify our craft. But building a better media is a task that involves journalists and non-journalists alike. Being angry is not enough; we need solutions.”

Sir, it is quite worrisome to read “Without fear and without favour” FT’s Tett confessing to “commercial pressures that are increasingly encouraging private sector media outlets to be more partisan”. Have you informed your shareholders about this? I would see it the other way, the more fakes and partisanship there is in the media, the more valuable do bastions of truth and diversity become. Or not?

Shaming out fakes and partisans must also be part of societies responsibility. For instance I have started to look for a collaborator to write a book tentatively titled “Me, Subprime Banking Regulations and FT”

@PerKurowski

Why does Gillian Tett insist in that bank regulators are doing such a splendid job so that they should stay on?

Sir, Gillian Tett, horrorized at the possibility, writes “consider what might happen to credit guidelines and stress tests if the White House puts pro-finance, anti-deregulation officials into the four Fed governor positions that will come vacant in the next couple of years” “Trump’s stealthy deregulation delights business” March 3.

Yes what could happen? If Trump helps to squeeze in some regulators who know that what is perceived as safe is much more dangerous for the banking system than what is perceived as risky; and would therefore not assign those loony risk-weights of 20% to what is AAA to AA rated and 150% to what is rated below BB-, we could only be better off.

If Trump help squeeze in some regulators who do not possess such statist agenda so as to risk weigh the Sovereign at 0% and We the People at 100%, we could only be better off.

If Trump help squeeze in some regulators who, when stress-testing banks, are also interested in looking at what should have been on banks’ balance sheets and is not, like loans to SMEs and entrepreneurs, we could only be better off.

Sir, Ms. Tett, and you too, should ask yourselves whether regulators have performed adequately their fiduciary responsibilities of doing no harm? As I see it, they have caused a crisis, caused stagnation and helped to create greater inequality.

With failed regulators like these, there is nothing better than real de-regulation.

@PerKurowski

Why is obvious crony statism referred to as crony capitalism?

Sir, I refer to Martin Wolf’s “Why Xi cannot succeed with his reforms” December 14.

In it, Wolf quotes the following from Minxin Pei’s “China’s Crony Capitalism”: “The emergence and entrenchment of crony capitalism in China’s political economy, in retrospect, is the logical outcome of Deng Xiaoping’s authoritarian model of economic modernisation… because elites in control of unconstrained power cannot resist using it to loot the wealth generated by economic growth.”

But “Capitalism” (at least according to Wikipedia), “is an economic system based on private ownership of the means of production and their operation for profit. Characteristics central to capitalism include private property, capital accumulation, wage labor, voluntary exchange, a price system, and competitive markets. In a capitalist market economy, decision-making and investment is determined by the owners of the factors of production in financial and capital markets, and prices and the distribution of goods are mainly determined by competition in the market.”

Sir, so why does it refer to “crony capitalism” when it is clearly much more a case of “crony statism”? Could it be that the “unconstrained power of the elites” also cover the terminology we are to use? Like for instance when references are made to our economies being under the yoke of “neo-liberalism”, all while bank regulators gladly risk-weigh Sovereigns with 0%, and We the People with 100%. Or like when intrusive and complex bank regulations are mentioned to have happened in a period of "deregulation".

PS. Here is the current summary of why I know the risk weighted capital requirements for banks, is utter dangerous nonsense.

@PerKurowski