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What with Growth and Inequality, if regulators had imposed risk weighted bank capital requirements 150 years earlier?
Saturday, March 12, 2016 10:02
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Sir, you hold that “The IMF and the Peterson economists” who in the latter case is none other than Olivier Blanchard, the IMF’s former chief economist, “should not succumb to defeatism, nor to complaints in the financial markets that loose policy is creating distortions or doing more harm than good” “Concern, not panic, over the global economy” March 12.
But you have succumbed to silence what most creates harmful distortions in the allocation of bank credit to the real economy.
This September 2016, there will be 30 years since frightened regulators concocted the credit risk weighted capital requirements for banks.
By allowing banks to leverage more equity with the safe than with the risky, banks earn higher risk adjusted returns on equity with what is perceived or decreed as safe, than on what is perceive as risky, like for instance SMEs and entrepreneurs.
So let me just ask you again to test if your motto “Without fear and without favor” is for real, or just a marketing ploy.
What do you think would have happened if regulators had imposed such credit risk weighting 150 years earlier?
As I see it there would have been much less of that risk-taking our economies need to grow and move forward in order to not stall and fall.
And as I see it, by denying much more ”the risky” the opportunities of accessing bank credit, inequality would be much larger.
So Sir, I simply cannot understand how you can keep mum on such dangerous regulatory distortion.
Who gave unelected bank regulators the right to call it quits for our Western Civilization? Is that not a reason to panic?
@PerKurowski ©
Source: http://teawithft.blogspot.com/2016/03/what-with-growth-and-inequality-if.html
