Neoliberalism’s history is not being correctly recorded

The two policies most mentioned in connection with neoliberalism (please google it) are “privatization”, referring to that the private sector knows better, and “deregulation”, referring to that it's better when the government interferes less. And one of the moments most mentioned about when neoliberalism crumbled, is the 2008 global financial crisis GFC.

But, in 1988, with Basel I, bank capital requirements changed from one single capital requirement e.g., 10 percent against all assets, to multiple risk weighted requirements, and with its most defining weights being 0% the government, 100% citizens. Basel III, the short version, contains 1626 pages.

So, banks being allowed to leverage more their capital... meaning making it easier for banks to earn higher risk adjusted returns on equity with government debt than with loans to e.g., small businesses and entrepreneurs, please, what has that to do with the private sector knowing better what to do than the public sector?

So, deregulation, please, has that not much more to do with putting regulations (with all its possible miss-regulations) in overdrive?

And please, would there ever have been a 2008 GFC if banks had been limited to leverage their equity 10 times with AAA to AA rated mortgage-backed securities, and not the 62.5 times European banks and US investment banks 2004’s Basel II allowed them to do?

Does arguing this make me defender of neoliberalism? No and Yes! 

I often identified the privatizations, for instance of utilities, as just a trick by the bureaucrats in turn to lay their hands on some easy fiscal revenues, which would later have to be repaid by us consumers through higher tariffs.

But, do I believe that small businesses and entrepreneurs know better what to do with bank credit than the bureaucrats not personally responsible for the repayment of it do? You bet!

Has the end of neoliberalism in 1988 been recorded for the history books? No! There's surely many who even swear it is still alive and kicking.

PS. You don't have to just take my word on it: “Assets for which bank capital requirements were nonexistent, were what had most political support: sovereign credits. A simple ‘leverage ratio’ discouraged holdings of low-return government securities” Paul Volcker

Why has not a proper independent autopsy of the financial crisis 2007-08 been done? The answer: What would be found!

When we see with how much care and dedication investigators perform the autopsy of the causes of an accident whenever a plane crashes, one can truly be surprised about how little autopsy has been performed on the 2007-08 financial crash.

But of course those performing the autopsy of a plane crash are not the designers of the plane, nor those responsible for its maintenance, nor air-traffic controllers nor, of course, those who were flying it… and so there are no conflicts of interests present in the investigation (I presume).

In the case of the Financial Crisis 2007-08 crisis any outside completely independent investigator would have determined its principal cause to be:

The very low capital requirements for banks when holding assets perceived as “safe”, and which created unmanageable perverse incentives for banks to lend or invest excessively in what was ex ante perceived as safe.

Evidences?: Just look at the debris: a) AAA rated securities and credit default swaps issued by AAA rated AIG that, at least US investment banks and European banks were allowed to leverage 62.5 times with; b) loans to sovereigns like Greece to which EU authorities had assigned a 0% risk weight, meaning no capital requirements at all; and c) loans to real estate like in Spain. Nowhere is something ex ante perceived as "risky" found to have caused any problem. What more can you need for a prosecutor to rest his case?

But since those investigating the Financial Crash 2007-08 were, by commission or omission, directly responsible for those risk weighted capital requirements, they all found it in their best interest to classify these as truths that shall not be named.

Until now their strategy has worked splendidly for them... even deregulation is denounced a thousand times more as the source of the problem than their misregulation... and some of the regulators have even been promoted, like to BIS and ECB... and other have found job working on Basel III.

PS. At least I managed to get through with some comments to the Financial Stability Board.