Current bank regulations express much more than Brexit, a dangerous payday-loan mood.

Sir, Tim Harford refers to “the payday-loan mood it is displaying in its Brexit negotiations. No gain is too small, no price too great, as long as the bill comes later.” “Want to solve a problem? Just wait” May 26.

Current risk weighted capital requirements cause banks to give much more credit to fairly unproductive but “safe” sectors, like housing, and less credit to potentially much more productive but “risky” ends, like loans to entrepreneurs. I would hold that follows a payday loan mood put on steroids… one that in complete violation of that holy intergenerational social contract Edmund Burke spoke about, places a reverse mortgage on our current economy.

Sir, just reflect on that the regulators assigned a 0% risk weight to sovereigns. That can only be justified arguing that the sovereign can only print money to pay back debt expressed in its own currency. Indeed but that spurious argument blithely ignores that printing money to pay back its own debts, is precisely one of the worst misbehaviors of a sovereign, like when Venezuela’ government prints loads of money, among other to serve its own internal debt.

And Harford reminds us: “The world is full of risks. Can anyone guarantee that over the next 300 years both the UK trust fund and country will survive asteroid strikes, thermonuclear war or a deliberately engineered pandemic?”

Indeed, that’s true, but how come then when regulators imposed their risk weighted capital requirements on banks, we decided to naively believe them, instead of asking: Who are you to know what the risks in banking are? And if you do, why are you not then the bankers?

@PerKurowski