June 15, 2017

Basel rules favor building “safe” basements for children to live with parents over financing “risky” job creation

Sir, Chris Watling writes “High house prices contribute to one of society’s great divides: that is between the haves and the have nots; between the older property-owning generation and younger renters unable to get on to the property ladder… Banks [when financing houses] now require substantially less capital than would have been required before Basel I and one-eighth of the capital required versus a corporate loan.” “Blame Basel capital rules for the UK’s house price bonanza” June 15.

Absolutely! The Basel Committee’s risk weighted capital requirements helps finance the “safe” basements where kids without jobs can live with their parents, but not the “risky” SMEs or entrepreneurs that could give the kids the jobs that could help them afford to buy a house… and less so at the current high credit inflated prices of houses.

How many letters have I written to you about the distortions in the allocation of bank credit to the real economy these regulations cause? Here are just some quite similar to this one. http://teawithft.blogspot.com/search/label/basements

Sir, you define yourself as “Without fear and without favour”… but the way you have silenced my arguments, only shows you running scared by some of your prima donnas with weak egos.