Does Lawrence Summers really think risk adverse bureaucrats can deliver “bold reform”?

Sir the pillar of current bank regulations is, as you should know, the credit risk-weighted capital requirements, which allow bank to earn much higher credit risk adjusted returns on equity when lending to what is perceived, ex ante, as absolutely safe, than on what is perceived, ex ante, as risky. And that stops bank credit from flowing freely and fairly to all the medium and small business, entrepreneurs and start-ups. And anyone who does not understand that the economy cannot move forward without that type of credit has never walked on Main street.

And so you can understand how frustrating it is to read Lawrence Summers finding room to include “policies to promote family-friendly work” in his list of needed structural reforms essential to increase productivity, and not including the need of correcting the above mentioned regulatory distortion, “Bold reform is the only answer to secular stagnation” September 7.

“Bold reform” Ha! How can clearly overly risk-adverse bureaucrats carry out that? They only know about throwing money at problems.

PS. As Summers also refers to the need of “infrastructure investments” we should not forget that there is a prior need of making sure those “infrastructure investments” are done efficiently, in terms of costs.