The egos of bank regulators that don’t want to be hurt stand in the way of a solution to Europe, and others.

In the financial sector the truly dangerous systemic risks reside only in the DNA of what is perceived as having a low risk. That is what our bank regulators failed to see, and their hurt egos now stand in the way of finding solutions to the European crisis, as they refuse to cut off the gas that has caused and is stoking the fires.

The capital requirements for banks based on perceived risk, together with the extreme scarcity of bank capital, is forcing the banks out of anything that is becoming perceived as more risky and into what for the time being is still perceived as less risky.

That is making the financing of what is already perceived as risky so much more difficult, while at the same time creating the excessive exposures to the last standing absolutely-not-risky borrower, who will then turn into the mother of all risks.

How can we make them swallow their pride and act before it is too late?

PS. Here´s a video that explains a fraction of the stupidity of our bank regulations, in an apolitical red and blue! http://bit.ly/mQIHoi