Allowing for risk-taking is an absolute necessity for having a vibrant economy.

Senior government officials who have served Democratic and Republican administrations, and former leaders in Congress from both parties, the Coalition for Fiscal and National Security, urgently call out “Addressing Our Debt is a National Security Imperative”, as U.S. national security in the 21st Century depends on a vibrant economy, and it not being undermined by the accumulation of excessive debt.

Unfortunately their proposed “The Framework”, does not include correcting the one fatal regulatory mistake that has destroyed the economies of both the U.S. and Europe and is impeding these from becoming vibrant again.

And I refer specifically to that odious policy, especially so in “the land of the brave”, of allowing banks to hold less capital (equity) when lending to those who are perceived as safe, “The Infallible” than when lending to those perceived as “The Risky”.

That results in the banks being able to earn immensely higher risk-adjusted returns on their equity when lending to “The Infallible” than when lending to The Risky”, and which effectively locks out the latter from having a competitive access to bank credit.

And those regulations are the sad result of bank regulators not having defined the purpose of the banks to include the efficient economic resource allocation, and to being completely oblivious to the fact that in order to even have “The Infallible”, “The Risky” play a fundamental role.

That truly odious regulatory discrimination, in favor of those already favored by markets and banks on account of being perceived as “safe”, and against those already disfavored by markets and banks on account of being perceived as “risky”, is sapping the economies of the necessary risk-taking and entrepreneurial spirit to keep these vibrant.

And the truly sad part of this fatal regulations is that they do nothing to diminish the risks of major bank failures because these, with the exception of when fraudulent behavior has been present, have always resulted from excessive exposures to what was ex-ante perceived as absolutely safe, and never ever from excessive exposures to something that was perceived as risky when incorporated in the balance sheets of the banks.

I, among others while being an Executive Director at the World Bank, 2002-2004, warned about the consequences of this regulatory risk-adverseness, but I have mostly hit the wall of disbelief in that the regulatory experts could have been so dumb. Well friends, they were!

I am not a U.S. citizen but I know that much of the future well being of my family depends directly on the well being of U.S. and Europe, and so this is also for me a vital issue... a real National Security Imperative.

Thanks for the attention. If you need more explanations you will find me at your service.

Per Kurowski

PS. In my church they sing a psalm that prays for "God make us daring"