The two truths our current unwise bank regulators blithely ignored, and therefore screwed up our banking system, and our economies

1st truth: 

When you give someone a favor you are, often unintentionally, de facto, disfavoring the one not receiving that favor. 

So when regulators embraced that paradigm that makes the capital requirements for banks a function of ex-ante perceived risks, more risk more capital - less risk less capital, they favored “The Infallible” and disfavored “The Risky”. And that stopped our economies in their tracks. 

Because, when you favor access to bank credit for those who are already favored, those who have already made it and do not seem risky, “The Infallible”, and, thereby, additionally disfavor the access to bank credit of those who are already disfavored, those who have not yet made it, “The Risky”, small businesses and entrepreneurs, you are, in essence, subsidizing the past and taxing the future. 

But, it gets worse 

2nd truth: 

When you favor the access to bank credit to someone or somewhat more than what they should normally be able to access it, given their risk-profile, you are, de facto, guaranteeing it will be receiving too much credit and, de facto, sooner or later become extremely risky, no matter how infallible it initially might have been.

Conclusion:

We must get rid of these regulators, they are not wise enough. We can’t afford them! They are completely incapable of taking us out of the hole they dug and placed us in. They will only dig us deeper and deeper into it.