April 14, 2015

By seemingly in vain trying to convince bank regulators to stop distorting, I do identify with doctor Ignaz Semmelweis

Sir, John Kay writes: “The medical profession is often resistant to innovation, especially innovation that challenges accepted wisdom — in the 19th century the Hungarian doctor Ignaz Semmelweis struggled for decades to persuade his colleagues that the best thing they could do for patients was wash their own hands”, “Pragmatism works best in the reform of economics”, April 15.

I am not a bank regulator by profession, but boy do I identify with doctor Semmelweis’ struggles. For a decade I have tried to persuade bank regulators that the worst thing they could do to promote the instability of banks, and the destruction of the economy, is to distort the allocation of bank credit to the real economy. But, there they are, getting their hands dirty, and still applying their Portfolio Invariant Credit-Risk-Weighted Equity requirements for banks.

Semmelweis did not manage to get his message thru to the medical community during his lifetime, since his observations conflicted with the established scientific and medical opinions of the time. The rejection of his ideas might have caused him to be committed to an insane asylum in which he was supposedly beaten to death.

I take the rejections of my arguments with much humor, and have the full support of family and friends, and so I believe I will be able to escape a similar tragic destiny.