Bankers, by limiting the voice of their parents to the 4 to 8 percent capital range, find it easier to write their own bonuses.

Sir, I sympathize deeply with much of the arguments presented by Lucy Kellaway in a “Lesson from kindergarten on executive bonuses” June 2.

That said I am not sure the analogy to her challenges as a mother is so accurate in this case, since I have the feeling that she does indeed still influence quite a lot the bonuses of her kids. And, that is not the case of banks.

The bankers, the kids, have been able to convince the regulator that the voice of their parents, the shareholders, should be very limited… to the 4 to 8 percent range. And the result of it all is that bankers are in essence very much capable of setting their own bonuses, which is something I am sure Lucy Kellaway would rightly fear if her kids could do.

Let us give banker’s parents more voice!

Excessive risk allergy is much more dangerous for the society than the risk addiction of some bank trader gamblers

Risk-taking is not something easy to comprehend. A serious family man can make a million one quid bets on flipping a coin and nothing happens, though if he makes a single one million quid flipping a coin bet, and it goes wrong, all hell breaks loose. But, is the society better served by one million family men making a million one quid bets on flipping a coin, than by one who is capable of gambling one million quid on one single flip of a coin? Who is to tell? 

Sir, Lucy Kellaway in “The risk addicts” February 2, quotes a repentant trader gambler being in favor of zero tolerance with respect to recreational gambling in the City. I just don’t know if that is so. With a policy like that, would one not risk eliminating part of the biodiversity of a financial center that makes it thrive? I believe I would favor the imposition of more effective gambling limits instead. 

And by Lucy Kellaway placing “risk-taking” in the perspective of our banks, as many do these days, she is further feeding the false notion that the current bank crisis was the result of excessive risk taking. Let me say it loud and clear, much more dangerous for banks than overconfident addicted gambler traders, are bank regulators with a “superiority complex” who think themselves able to expulse risks from banks in a safe way. 

The Basel Committee bank regulators, thinking they were very smart, allowed the banks to hold much less capital to what was perceived as “absolutely safe” than for what was considered “risky”. And with that they gave the banks the incentives to bet excessively on what was, ex ante, perceived as “absolutely safe”, precisely what has caused all other bank crises in history. Their risk allergy did not cost billions, it cost us trillions, and that without including the opportunity costs for the society of its banks betting less and less on “The Risky”, like the small businesses and entrepreneurs. 

I firmly believe that the last thing a society can afford to do is to undervalue the worth of its willingness to take risks. The Western World was build upon risk-taking, and a lot of it plain crazy risk-taking… and which is why in our churches we can hear psalms begging “God make us daring!”

Just don´t pay Harvard cash-up-front!

Sir Lucy Kellaway answering “Am I mad to invest in a Harvard course in a downturn?” July 2, does not tackle the real madness of it which is the way that the course would seem to be contracted with terms of $ 60.000 cash-up-front.

I would suggest a better offer to Harvard would be $3.000 up front to cover for your marginal costs and then 20% of any additional earning produced by the graduate during the next 5 years, even if that comes to be much more than $60.000. I mean that would make the so much recently discussed incentive structures better.