September 20, 2013

Lord Turner, put on a dunce cap, and go and sit in a corner

Sir, Gillian Tett quotes Lord Turner in that a standard economics text book claims that banks exist to “raise deposits from savers and then make loans to borrowers”… and “primarily lend to firms/entrepreneurs to fund investment projects” but that it is a fiction, as he calculates that today in UK a mere 15 percent of total financial flows actually go into investment projects, the rest is to support existing corporate assets, real estate or to “facilitate lifecycle consumption smoothing”, “Debt explosion is the real story behind QE dance”, September 20.

Frankly, what did this former bank regulator would happen when he and his colleagues never concerned themselves one iota with what the purpose of the banks could be; and limited their action to mostly allowing extremely low capital requirements for banks on whatever exposures that, ex ante, could be perceived as “absolutely safe”; something which of course made it so much more difficult for “The Risky”, the medium and small businesses, the entrepreneurs and the start-ups to access bank credit, in competitive terms?

The regulators helped to hook western economies on ever-expanding levels of debt? Yes, indeed, but worse yet, they castrated the banks and introduced a regulatory risk-aversion that is taking the western economies down down down.

As I see it Lord Turner is just one of those regulators who should put on a dunce cap, and go sit in a corner. Is it rude of me? Perhaps but what, except for socially sanctioning such dumb behavior, can an ordinary citizen do?

And, of course, this also goes for many other of Lord Turner's regulating colleagues. Like Mario Draghi for example. A Big "Dunce-Cap" Party!