August 01, 2013

Hollywood would never allow a Basel III to be produced by those responsible for a Basel II flop

Sir Hans-Joachim Voth and Mauricio Drelichman refer to the worth of risk-sharing between investors and the governments who borrow, as well as the need for thick equity cushions to help banks absorb the losses and withstand the problems derived from government defaults, “Banks should learn from Habsburg Spain” August 1, 2013

Put that in the perspective of Basel II bank regulations which required a bank to hold 8 percent capital (equity) when lending to a “risky” citizen, but allowed banks to hold no capital at all, ZERO, when lending to one of the “infallible sovereigns”.

Total disaster had to be the result of such undue favoritism of the sovereigns and it should be obvious now that it was plain crazy to allow a bunch of silly bank regulators to regulate for the whole world in splendid and incestuous isolation.

But the looniest bit seems still to come… since we have mostly allowed the same regulators responsible for the Basel II flop, to produce Basel III using basically the same script, directors and actors. Neither Hollywood nor Bollywood would ever have done such a stupid thing.