The mother of all lacks of confidence

We so often hear about the lack of confidence, of so many, being the largest obstacle to manage to fully recover from this crisis. But, one of the most significant lacks of confidence, indeed the mother of them all, is not even mentioned. I refer to the lack of confidence in bankers, and the markets, shown by bank regulators.

Bank regulators, scared witless by the possibility that bankers would expose themselves too much to assets deemed as “risky”, something that bankers never or very rarely do, created incentives for bankers to concentrate on assets that were, ex ante, perceived as “not risky”. In doing so they fomented an incredible dangerous highly leveraged bank exposure to the “not risky”, something which has basically already placed us over the brink of disaster. 

What could help us is for bank regulators to show more confidence in those so useful and needed “risky”, like the small business and entrepreneurs, those who bring energy and vitality to the economy... but no!, the current generation of worried to death nannies of bank regulators just don’t seem to have that in them.