Ben Bernanke: “The Courage to Act” - in the midst of a sissy regulatory aversion against banks taking credit risks?

Sir, I refer to Sam Fleming’s comment on Ben Bernanke’s book “The Courage to Act”, “Bernanke attacks Capitol Hill over crisis role” October 6.

From the book he quotes “The Fed can support overall job growth during an economic recovery, but it has no power to address the quality of education, the pace of technological innovation, and other factors that determine if the jobs being created are good jobs with high wages.”

There is an Equal Access to Education Act. Suppose there were some few agencies that rate the qualifications of a student to make it meritoriously; and suppose universities used these ratings during their pre-screening process. What would America say if the Department of Education ordered these Education Worthy ratings to be considered once again in the final selection… and with double importance?

There is an Equal Credit Opportunity Act (Regulation B). Bankers already consider credit risks when setting interest rates and deciding on the size of exposure, among others the information provided by credit ratings. But then bank supervisors decided, by means of the Basel Accord in 1988 and its subsequent revisions, that the capital banks would be required to hold, were also to be based on exactly the same credit risk perceptions. 

That of course meant that anyone who was perceived “risky” from a credit point of view would be considered doubly risky, while anyone perceived “safe” would be considered doubly safe. And of course that has completely distorted the allocation of bank credit and thereby hindered job creation and, by keeping a lid on opportunities, helped cause more inequality.

On this odious discrimination against fair access to bank credit, Ben Bernanke has kept absolute silence. Most probably he did so completely unwittingly, but that is not a valid excuse for a chairman of the Federal Reserve. But of course he is far from being the only one to blame.

To top it up Bernanke names his book “Courage to act”; when the last decades have been signed by a sissy regulatory aversion to credit risk... as if avoiding taking the credit risks that helped the country to become what it is, has now become the only purpose of banks… in the Home of the Brave. Hah! 

With bank regulations like these, clearly the “American economy will fall tragically short of its extraordinary potential”. 

By the way, regulators assigner a zero risk weight to the Sovereign (the government), while the private sector, that one were most citizens that make up a Sovereign usually work, got a 100 percent risk weight. Anybody who does not find that strange, harbors a statist heart and mind.

I can hear all the SMEs and entrepreneurs who thanks to bank regulations never got their chance rocking away:

You ain’t nothing but a statist… scheming all the time.

You ain’t nothing but a statist… scheming all the time.

You ain’t never created something… and you sure ain’t no friend of mine.

PS. Courage is involved when taking calculated risks, not when taking desperate measures. 

@PerKurowski © J