Bank regulations, like American Football, or soccer, cannot only be defensive, it needs an offensive too

I cannot hold myself to be an expert on American Football, in fact I believe I have never ever thrown or received a real American football, but, that said, I am absolutely sure that any team who concentrated just on defense, would not go far. 

And that is what is happening with our banks. The bankers, defensively, consider the perceived risks of default of their clients, when deciding whether to lend or not, how much, at what rates and under what terms. But then came the regulators, and instead of acting as the umpires they should be, they also wanted to be defensive coaches, and used the same perceived risks in order to defensively set the capital requirements for the banks, more risk – more capital, less risk – less capital… and no one really cared one iota about the offensive, namely how banks are to allocate efficiently our economic resources.

And as a consequence, defensive bank plays, like lending to and investing in what is perceived as absolutely safe, “The Infallible”, was made so profitable in terms of return on equity so that these plays, and the defensive players, completely took over the game; while offensive plays, like lending to “The Risky”, like the small businesses and entrepreneurs, and offensive players, like community banks,  were completely ignored and abandoned. And, of course, it all lead to disastrous results. 

What a lunacy! Head coaches, players, umpires and most of the public are all, like on a ship of fools, still not able to even see what is happening, and many, in “the land of the brave”, begging for even more defensive plays; leaving me and some other few crazy minds all alone in the stands, monotonously shouting: “What about the offensive?”, “What about the jobs?” 

Friends, in American Football (and Europe, in soccer too) you can never win if you do not dare to go on the offensive with whatever risks that entails…capisce?