An American approach to banking

Regarding the April 29 editorial “A diet for the big banks”:

It suffices to remember the saying about “a banker being that chap who lends you the umbrella when the sun shines but wants it back as soon as it looks like it is going to rain” to know that those assets perceived as safe are already much favored over those perceived as risky. The risk weights applied by the Basel III regulations and based on exactly those same perceived risks only increase the gap between “The Infallible” and “The Risky.”

And that is why I very much salute the bill by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) that looks to “require more capital and better capital but also limit the ‘risk-weighting’ of assets.” More capital is a perfectly legitimate requirement, but the imposition of risk weights is fundamentally incompatible with “a land of the brave.” The United States did not become what it is by avoiding risks.

That the bill puts the United States at odds with Basel III regulations does not matter, as those regulations have been proven harmful enough. On the contrary, Europe would also do better with a Brown-Vitter proposal.

Per Kurowski, Rockville

The writer was an executive director of the World Bank from 2002 to 2004.

Ps. A recent comment to the Financial Stability Board

US, it is not easy to remain “the land of the brave”, with castrated banks singing in falsetto

I came late to DAVID A. STOCKMAN´s Sundown in America, in the New York Times, “State-Wrecked: The Corruption of Capitalism in America” March 30, comments were closed. 

But this is what I would have commented, again, for the umpteenth time. 

America, be careful you do not turn into “the land of the pusillanimous”…since that is where you are heading with current bank regulations.

The day when bank regulators came up with, or accepted, the idea that banks could hold less capital against what was perceived as “absolutely not risky”, than against what was perceived as “risky”, even though those perceptions were already being cleared for by means of interest rates, size of exposures and other contractual terms, that day they castrated the banks. 

And friends, it is not easy to remain “the land of the brave” with your banks singing in falsetto.

http://subprimeregulations.blogspot.com/2013/03/there-is-plentiful-of-vested-interest.html

Is America, the land of the brave living within the land of the sissy, or vice-versa?

I just finished seeing Zero Dark Thirty, which refers to all that US risk-taking needed in order to kill Osama Bin Laden, something quite compatible with the “land of the brave”. 

But then I compare that to all that sissy and dumb risk-aversion implicit in bank regulations which pay banks extra returns on equity, for lending to “The Infallible”, no matter how useless, and not when lending to “The Risky”, no matter how important, and I wonder how all that can coexist within one same country. There just has to be some immense disconnect. 

Is America, USA, the land of the brave living within the land of the sissy, or vice-versa?

And, who is Elizabeth Warren to speak about “The system is rigged”?

If there is something that you can really accuse the financial system of being rigged by, that are the capital requirements for banks based on perceived risks. These requirements favor immensely those already being favored by the markets, namely those borrowers perceived as “The Infallible”, and thereby discriminate immensely against those already being discriminated against by the markets, namely those borrowers perceived as “The Risky”, like small businesses and entrepreneurs. 

And that odious discrimination, constitutes a regulatory wedge which only increases the existing the inequalities and reduce the opportunities, as the “The Infallible” are most often the haves, and, the “The Risky”, the not haves. 

And since Elizabeth Warren, having been involved with regulations for such a long time, has not uttered a word against that regulatory discrimination, I am not sure what moral right she has to speak out about “The system is rigged”?

What nonsense is believing in a "level playing field", and then not speaking out against colleagues and regulations un-leveling it? What has regulatory discrimination against those perceived as "risky" to do with "giving everyone a fair shot"? What has this extreme regulatory risk-adverseness to do with the need to "restore the values that built the nation"? Is not just betting on The Infallible "betting against the American people"?

She said in her recent Democratic Convention speech: “I talk to small business owners all across Massachusetts. Not one of them—not one—made big bucks from the risky Wall Street bets that brought down our economy.” And I must say: “No, Elizabeth Warren, of course they did not, they were too busy having to pay all that extra interest rates to the banks that the bank regulations caused.” 

She said in her recent Democratic Convention speech: “We turned adversity into progress because that's what we do” And I must say: “No, Elizabeth Warren, you did not! You were among those many regulators who want to turn progress into risk-adversity! And this, amazingly, in the land of the brave!” 

But, let me be absolutely clear, I could use exactly the same arguments against all those on the other side of the political spectrum who extol the benefits of a free market, but who also keep absolute silence about this dirty regulatory intervention and distortion of the market. And so they should shut up too!

Does this mean I do not support the Consumer Financial Protection Bureau? Of course I support it! Only that I believe that one of that Bureau´s first responsibilities, is to see that those perceived as “risky”, are not also discriminated against by the regulators.

Albert Einstein dixit: “No problem can be solved from the same level of consciousness that created it”

The Western world is being brought to its knees by mad bank regulators

The Western world is the result of risk-taking in all shapes and forms… “God make us daring!” ends one of the psalms sung in its churches… and we honor the successful and feel for the unsuccessful. 

But regulators, concerned only with bank failures, decided on capital requirements for banks based on perceived risk. And with these they gave the banks additional incentives to embrace lending to those perceived as “not-risky”, like the triple-A rated and “infallible” sovereigns, and to further avoid the “risky”, like the small business and entrepreneurs. And with this they stuck a dagger in the very soul of the Western world. 

And the dagger proved also to be more than useless for its initial purpose. Since it is precisely when banks embrace too much something that is perceived as absolutely not risky, that they fail en masse, the regulators doomed the world to this the mother of all systemic bank crises. 

The survival of the Western world now needs to begin by rescuing the possibilities of its risky risk-takers to take the risks we depend upon as a society, and that requires to allow the “risky” to compete for bank credit without regulators discriminating against them. 

And that begins by firing the nannies in the Basel Committee and in the Financial Stability Board, and renaming the latter immediately the Financial Functionability Board so that the regulators do not forget what they are there for.

Basel bank regulations are un-American, un-European and un-Western World

I do indeed think that current regulations are un-American, but I guess my reasons are not exactly those of Jamie Dimon.

Yes! It is un-American, because by allowing banks to leverage more their capital when earning the risk-adjusted-interest-rate from those perceived as “not-risky” than when earning the same rate from those perceived as “risky”, Basel regulations have introduced a silly and unproductive risk-adverseness that is not compatible with a “ the land of the brave”

Yes! It is un-American, because allowing banks to leverage immensely more their capital when lending to the government than when lending to their small businesses and entrepreneurs, is stealth communism, absolutely not compatible with “the home of the brave”

Yes! It is becoming even more un-American, because allowing some banks to be named Systemically Important Financial Institutions, SIFIs, against a token additional 2.5 percent equity paid over many years, and thereby awarding them a “Too-big-to-fail” franchise, and relegating de facto all other banks to the group of Systemically Un-Important Institutions, SUFIs, is, or should be, an un-American discrimination

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