August 06, 2012

Again, can we please have a Financial Functionability Board?

Sir, Gillian Tett writes, “After all a financial system in which transactions are secured on assets is likely to be a healthier system than one which is largely – or patchily – unsecured”, “Cyber finance takes its collateral thinking test”, August 6. Why is that so, how on earth does Ms. Tett know that? 

Ms. Tett, like most, is stuck in a Financial Stability Board mentality of let us castrate the banks so that they do no harm. She, like most, is seemingly incapable of understanding that giving the banks incentives to go for the officially not risky and avoid the risky, was a primary cause for this crisis. 

The healthiest banking system will always be the one helping to produce the healthiest economy. In this respect we urgently need a Financial Functionability Board, able and willing to understand also the risks of risk-avoidance, so as to stop the regulators from digging us further in this hole of “L’economia castrata” where we find ourselves.