Saturday, September 20, 2008

The risks of following the wimps from Basel

Stating that “poor credit-rating practices” have brought on the current crisis is part of what brought us here, because the fact is that the better the credit-rating practices, the more we risk following the practitioners into the wilderness.

The minimum capital requirements for banks based on credit rating of risks, introduces an formal regulatory risk adversion against “risks of default” that will set us up to all other type of much more dangerous risks.

Who dares to tell me that avoiding default risks is all financing is about?

From now on are the bailouts we going to see only to be the result of faultily measured risks and not of those risks that society incurs to move it forward?

Currently our biggest problem is that most have completely bought the silly one track-mind agenda of our financial regulators… the Basel wimps!

Financial regulation is much too serious to be left in the hands of the members of the mutual admiration club of financial regulators.

If we are going to waste taxpayer’s money let us at least assure the crisis has been worth it. Never in life have I seen such a useless crisis than the current one that has only produced millions of people to move in into their homes only to be evicted a couple of months and many tears later.

Tuesday, September 16, 2008

The question!

On one side, given the very accommodative stance of central banks, there was an ocean of resources.

On the other, side given the honest to good real greed of intermediaries for pushing through deals even if that means bending the meaning of common sense, there were an ocean of homes to be sold and purchased.

The channel that allowed for the two oceans to crash into each other and create this ultimate financial tsunami were the AAA ratings awarded by the credit rating agencies that had been themselves empowered to do so by the financial regulators.

In a letter to the Editor of the Financial Times published May 11, 2003 I said “Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new breed of systemic errors, about to be propagated at modern speeds".

To me my comment illustrated what should be a natural concern for financial regulators expected foremost to be wise… but they did not seem to care.

To me my comment illustrated what should be a natural concern for influential economists and financial experts… but no one said anything.

How come?

In being able to answer that question, forthrightly, lies the way out of our current financial predicaments and our only chance for not ending up even worse.

In making the truly responsible truly accountable lie our best chances for taking that way out.

Mr. Alan Greenspan and friends. Look at what old soldiers do and learn to fade away. We do not need your search for excuses.