Hayek and Keynes would have stood arm in arm against different capital requirements for bank assets based on perceived risk.

Sir, we have the world in financial turmoil as a direct consequence of regulators having allowed banks to hold extremely little capital, 1.6 percent or less, when lending or investing in what was officially perceived as “The Infallible” while requiring the banks to hold 8 percent against any exposure to “The Risky”. And yet five years after the crisis outbreak we can still read comments, by for instance Robert Sutherland Smith, that attribute this crisis to a universal banking which was supposedly freed in the “name of Hayekian neoliberalism”, “Bitter harvest of Hayekian neoliberalism”, December 27. 

In “free banking”, though there is of course different capital costs for different risk structures, there is no such thing as different capital requirements based on the perceived risk of the different individual assets of a bank, and Hayek would never ever have approved of such distorting regulatory stupidity. When will the underlying political agendas allow for that to be understood? 

And of course Lord Keynes, and who wrote “There is no objection to be raised against the classical analysis of the manner in which private self-interest will determine what in particular is produced, in what proportions the factors of production will be combined to produce it, and how the value of the final product will be distributed between them”; and who was an aggressive and able speculator on his own, would also fiercely have opposed such folly.