Too careful is also “carelessly”

Sir, Gideon Rachman writes “It is a standard, self-pitying complaint in Brussels that the crisis in the eurozone was triggered by the collapse of a US investment bank, Lehman Brothers”, “America cannot live so carelessly forever”, October 8.

Yes that is the superficial fact, but the real truth is that what caused both Lehman Brothers, the eurozone and the US to have a financial crisis, were bank regulations coming from the Basel Committee. For instance, on April 28, 2004, the Securities and Exchange Commission, which supervised Lehman Brothers, effectively delegated its role to the Basel Committee.

And by the way, the crisis was not caused by being too careless, on the contrary by being too careful. It was capital requirements for banks which were so much lower for what was perceived as “absolutely safe” than for what was perceived as “risky”, which caused that extraordinary dangerous large level of bank exposures, backed with minimal capital, to AAA rated securities, to banks of Iceland, to real estate in Spain, and to sovereigns like Greece.