February 07, 2013

And now, let’s find and publish the trail of all sophisticatedly mistaken bank regulator talk

Sir, Kara Scannell and Brooke Masters quote some of the shameless exchanges that took place among traders with respect to the manipulation of Libor, Tibor and what have you. “Trail of casual trader talk comes back to haunt RBS”, February 7

I wish they would be equally willing to find and publish the certainly much more sophisticated sounding arguments which led bank regulators to allow banks for instance to hold securities with an AAA to AA rating, or lend to Greece, against only 1.6 percent in capital, meaning authorizing a 62.5 to 1 leverage on those exposures.

It would also be interesting reading how they defended a concept like that when a German bank lent to a German entrepreneur it needed to hold 8 percent in capital, but when lending to the German government it could do so against zero capital.

I ask all this because, without the slightest doubt, this most certainly totally unwitting interest rate manipulation carried out by the bank regulators, has de facto caused immensely more damages than all other scandalous interest rate manipulations we have been reading about lately, put together.