Wolfgang Münchau has not earned the right to now appear as the one demanding “banks to take on more risk”

Sir, Wolfgang Münchau writes “One useful measure that would bring immediate benefits would be purchases of non-performing loans in the banking sector…. The objective should be not to protect bank profits but to get banks to take on more risk” “Eurozone woes demand a much bolder response” March 7.

And he also writes that he favors helicopter droppings over QEs because that “policy would bypass governments and the financial sector. The financial markets would hate it. There is nothing in it for them. But who cares?”

Is he wrong? Of course not! But who is he to now demand that kind of bold action?

Over the years Münchau has kept mum on all letters I sent reminding him of the dangers of credit risk aversion caused by the risk weighted capital requirements for banks, like one in 2007. And equally mum on the letters were I informed him that, because of such risk weighing, the liquidity provided by QEs did not reach where it was most needed by the real economy, like one in 2012

Here is but one example of my many letters to Wolfgang Münchau and that by the way suggests the capitalization he now speaks of.

Sir, you can find many many more letters to Münchau here:

And even though ideas can be dressed up in different words Münchau should be careful. “Never plagiarize. Always attribute” is a simple, clear statement in the Society of Professional Journalists Code of Ethics that leaves no room for ambiguity.

@PerKurowski ©

FT, John Plender, it was FIVE years ago that I told you “Simplicity in banking should always take precedence”

Sir, John Plender writes that Deutsche Bank’s net equity in 2007 amounted to just under 2 percent of total asset, meaning an over 50 to 1 leverage, while “its tier one core capital under the Basel weighted capital was 8.6 percent” which implies a lower than 12 to 1 leverage, “Simplicity in banking should always take precedence” December 7. 

As a consequence of not reading up sufficiently on what Basel II really was about you were duped. On my TeawithFT blog you can find hundreds of letters that tried to explain the Basel distorted bank leverages to you. You ignored these and even kept on again and again comparing the Basel risk-weighted bank leverages with the historic un-weighted bank leverages. 

And this amounts to a quite sloppy journalistic job and a general lack of questioning capacity in FT. 

And now on “simplicity” 

On December 19, 2007, John Plender, in “Investors pray for acts of God but even they come at a cost”, asked, what is the right level of capital for today´s financial world? 

And here is the answer to that that I wrote to FT, and to John Plender, five years ago: 

“Since it is in fact impossible to calculate the right capital then the best thing would be to be humble about it and require one single capital requirement on assets, instead of arrogantly trying to outwit the market as the regulators did when they created their current minimum capital requirements that differentiates based on how risks are perceived, primarily by the credit rating agencies. 

It is when the regulators themselves start acting like God that they really set us up for the big systemic disasters.” 

Does FT really have the "without fear and without favour" in it itself to recognize those who have been right all the time, even though these do not belong to FT’s own crony intimate circle?