If the helicopter is to be piloted by a bank regulator you must absolutely keep it on the ground.
Sir, John Kay gives us the image of a central bank governor flying across the country in a helicopter, a “deranged grin on his face as he showers money on a grateful populace”, “…and the argument for keeping the chopper on the ground”, February 13.
That image is great but wrong. Inasmuch the central banker also believes himself to be a Basel inspired bank regulator, he would only shower money on the financial aaaristocracy, like the AAA to AA rated securities or the “infallible” sovereigns, and avoid like pest giving any money to “The Risky” populace.
The most important argument for keeping the chopper on the ground is that it would be much more useful to eliminate the capital requirements for banks which discriminate based on the perceived risk of the assets of the banks, and not on the risk of the banks. That would allow banks to once again perform their vital social function of allocating economic resources in as an efficient way as possible.
If that cannot be done, because that would require the bank regulators to be sufficiently courageous as to admit they were totally wrong, the helicopter might be our best possibility, but that only as long as no bank regulator is piloting it.
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