A letter in Washington Post: Another 'worst': Faulty bank regulation

Another 'worst': Faulty bank regulation 

The Dec. 20 Outlook compilation of the decade’s worst ideas did not include the one most to blame for the loss of most of the past decade’s growth: regulations that allowed banks to hold absolute minimums of capital as long as they lent to clients or invested in instruments rated AAA, for having no risk. This launched a frantic race to find AAA-rated investments wherever and finally took the markets over the cliff of the subprime mortgages. 

The most horrific part is that it seems likely to endure because regulators can’t seem to let go of this utterly faulty regulatory paradigm. Let me remind you that banks are allowed to hold zero capital when lending to sovereign countries rated AAA and that there are already many reasons to think that the credit quality of many sovereign states has been more than a bit overrated.

Here other of my letters in the Washington Post on the same theme:
http://subprimeregulations.blogspot.com/2018/07/trade-wars-will-mean-new-tariffs.html
http://subprimeregulations.blogspot.com/2017/04/when-banks-play-it-too-safe-putting.html
http://subprimeregulations.blogspot.com/2016/08/banks-and-regulators-dont-care-about.html
http://subprimeregulations.blogspot.com/2015/11/the-reverse-mortgage-on-economy-baby.html
http://subprimeregulations.blogspot.com/2014/12/another-letter-in-washington-post-let.html
http://subprimeregulations.blogspot.com/2013/04/another-letter-in-washington-post.html
https://subprimeregulations.blogspot.com/2008/06/a-letter-in-washington-post-aspect-of.html

https://subprimeregulations.blogspot.com/2007/09/factors-in-financial-storm.html