Sir, would you trust a columnist who refuses to acknowledge what produced Europe’s financial crisis?

Wolfgang Münchau asks: “would you trust with your own security somebody who cannot even contain a medium-sized financial crisis? I personally would not, which is why my own preference is for the Schengen system of passport-free travel to be suspended indefinitely” “A history of errors behind Europe’s many crises” March 28.

Sir, here are some of the Basel II’s risk weights that determined how much of the basic bank capital requirement of 8 percent banks were required to hold against some different exposures:

Loans to sovereigns zero percent; to the AAArisktocracy 20 percent; financing residential housing 35 percent; and loans to ordinary unrated citizens 100 percent

That meant banks could leverage equity unlimited times when lending to sovereigns; 62.5 times to 1 when lending to the AAArisktocracy, 35.7 times when financing residential housing 35.7, and only 12.5 times to 1 when lending to the unrated citizens.

And that allowed banks to earn different risk adjusted returns on equity not based on what the market offered, but much more based on what the regulators dictated.

So forget the Euro, forget bank unions, that distortion of the allocation of bank credit to the real economy had to provoke, more sooner than later, financial crises that will destroy Europe.

And so I ask you Sir, would you trust a FT columnist that steadfastly refuses to acknowledge such facts to opine on anything? I would not!

@PerKurowski ©