What do the financial regulations say about the mental capacity of the regulators, and ours?

1st Quadrangle: Excessive lending to those who are perceived as having a low risk of default:

2nd Quadrangle: Excessive lending to those who are perceived as having a high risk of default:

3rd Quadrangle: Insufficient lending to those who are perceived as having a low risk of default:

4th Quadrangle: Insufficient lending to those who are perceived as having a high risk of default:

Let us analyze which role each quadrangle plays in causing a financial crisis.

By far, the most likely and perhaps even exclusive cause of a financial crisis is found in the first quadrangle that of excessive investments to what was perceived ex-ante as not being risky.

Next, insomuch as it could cause a problematic lack of economic development, we could mention quadrangle 4 that of insufficient investments to those representing an ex-ante higher risk of default.

Quadrangle 3 that of insufficient lending to those who are perceived as having a low risk of default is quite unlikely to occur.

Finally, what really never ever causes a financial crisis, as it goes against the coward nature of capitals and bankers, is quadrangle 2 represented by an excessive lending to those who are perceived as having a high risk of default.

If we then observe how the current regulators have imposed very low capital requirements, zero to 1.6 percent on the quadrangles represented by those being perceived ex-ante as having a low risk of default, and a much higher though quite reasonable 8 percent on the quadrangles represented by those who ex-ante are perceived as having a high risk of default, what does this say about the mental clarity of the current regulators?

I can only conclude in tha they are thick as a brick! And so are we, allowing these regulators to play out, totally unsupervised their bedroom fantasies of a world without any bank failures.

What on earth are we to do with a world where no banks fail when doing their jobs and we all might fail because banks are not doing their job?