December 22, 2009

Banker’s fears should pale in comparison to ours.

Sir Gillian Tett writes “when banks have made loans to western sovereign nations – or simply bought their debt, in the form of bonds – they typically do not post big reserves, since such debt is deemed ‘zero risk weighted’ in bank regulatory rules, and most western countries carried a triple A credit rating”, “Sovereign risk comes high on banker’s fears for 2010” December 22.

As I have written to FT so many times over the years now, though it has been blithely ignored, the banker’s fears should pale in comparison to ours as citizens, seeing that banks are allowed to lend to the State (which is what “sovereign nations” really means) without any capital requirements while, when lending to an ordinary citizen it must find at least 8 percent in equity.

Is not the State powerful enough without this regulatory favouring? Can’t you see it? Our banks are being nationalized through their balance sheet... or what would you call it when the bank holds many times their equity in government obligations?

I never held FT to be a procommunist paper but contemplating it’s unbelievable silence on this issue I am quite sincerely starting to have my doubts.