To the toxic legacy of Greece we should add the lack of accountability of bank regulators.

Sir, Martin Wolf writes “For Greece was, indeed, a case of remarkable fiscal profligacy, with net public debt at more than 100 per cent of GDP even before the crisis” and “If the culpability of both sides – lenders and borrowers – had been understood, the moral case for debt write-offs would have been clearer”, “The toxic legacy of the Greek crisis” June 19.

And Wolf, not agreeing with the fiscal tightening imposed on Greece concludes “Yet the reaction of policy makers has not been to admit the mistakes, but to redefine acceptable performance at a new lower level. It is a sad story”

Indeed, but the story is much sadder yet. Behind that amazing level of public debt Greece managed to contract, lies the fact regulators allowed banks to lend to Greece holding only 1.6 percent in capital, implying a mindboggling authorized leverage of bank equity of 62.5 to 1, and they have not been held accountable for that. On the contrary, the same insane regulators, after this box-office flop of Basel II, have been allowed to produce Basel III, using the same basic script. Hollywood would never ever have allowed such a thing. And Mario Draghi, the chairman for many years of the Financial Stability Board, has even been promoted to chair the European Central Bank.

But a big part of the responsibility for that the legacy of Greece is so sad and toxic, lies of course also with journalists like Martin Wolf, who have not criticized the regulators as they should.

PS. Sir, just to let you know, I am not copying Martin Wolf with this, since he has asked me not to send him any more comments related to “capital requirements for banks based on perceived risk”… he already knows it all… he thinks.