Friday, November 14, 2008

Bank regulators, why, why, why?

If all bank crisis in history have resulted from excessive exposures to what was perceived as “absolutely safe”, or at least very safe, and none ever from excessive exposures to what was perceived as risky… what is the rationale behind capital requirements for banks which are much lower for what is perceived as absolutely safe, or at least very safe, than those for what is perceived as “risky”?