Saturday, December 1, 2012

Mario Draghi. Do the structural reforms in bank regulations needed to allow job creators to do their job. Or shut up!

Pan Pylas, AP, reports that “Eurozone unemployment hits another record high”, December 1, 2012. 

And in this context that Mario Draghi, the president of the European Central Bank, the former chairman of the Financial Stability Board, and as such one of the most responsible for current bank regulations declared: “We expect, however, that progress in structural reforms, especially those that improve the functioning of labor markets, will help lower unemployment and facilitate new employment opportunities” 

Of course Draghi is partially right, but neither he nor any of his other bank regulating colleagues, has a right to preach anything to anyone about unemployment. 

He and the other overly risk-adverse nannies decided to allow banks to hold much less equity when lending to “The Infallible” than when lending to “The Risky”; which of course made the banks expect earn much higher risk-adjusted returns when lending to The Infallible” than when lending to “The Risky”. And that effectively locked out, from having a competitive access to bank credit, the “risky” job creating small businesses and entrepreneurs. 

What Draghi should do, now, besides stating his mea culpa, are to push for the structural changes to bank regulations that are needed for our job creators to have a chance to do their job… or just shut up and go home, wearing of course his cone of shame.