As for your comment on Clans. I never said they were good or bad — they are just a unit. Family status is not the same today as it was then and to try and compair them is a bit difficult. The status came from ruling class not money, though money could be involved. Though this was not set in stone all over Europe, usually the eldest son would gain the family lands and title, the second the mother’s, the third went to the church and the rest tried to make a living without becoming commoners or by marriage into a female heir family. Last names and titles were taken from where they were going to gain in society in terms of status. Thus only the first child might have the father’s last name. The second son the mother’s name, etc.

This is James Kwak’s board and my comments were addressed to him and Simon Johnson, but I would be happy to discuss my field to anyone who is honestly interested at the following email (b_a_mogel at yahoo.com) no spaces.

my favourite fix which would well synch with Per’s take on risk would be to make one of the seven sins, i.e. PRIDE, fashionable, albeit in the currently considered to be un-cool stuffy professional pride (it seems there really existed Prussian civil servants who were to proud to consider taking bribes)

an investor proud of his professionalism and merchant ancestry would not have gone for those AAA-balloons just like (hopefully) a Venetian merchant would not have sent pirates against the vessels of his neighbours
- as this example from the past shows, it seems I am probably dreaming again of the impossible? or is it a question of whether his society would expel him if he were caught at it?
but still this professional pride exists one a very individual basis one can meet it again and again wherever people refuse to do a sloppy job because they would feel degraded by consenting to it – but people to stick with it unfortunately tend to be judged on the stupid side unless of course it is the plumber fixing something in your house then you adore him

My main issue, that given capitals are coward regulators need to stimulate prudent risk-taking instead of that imprudent risk-aversion they have been pushing, is something completely ignored by Simon and I would say by most others.

Why is it so? That is the power of a paradigm. One of these days they are going to wake up totally convinced they have always believed the same what I say.

And that is then going to be their new box.

Now I am out for today. cheers

http://en.wikipedia.org/wiki/Cuntrera-Caruana_Mafia_clan

This does not seem out of synch with Simon Johnson’s comments. I assume you would want to see Basel rewrite have more prominence.

What has got me puzzled is if all this is clear, why has no action been taken and who is standing in the way and for what reason?

Am I on the right track? Seems like a draft of Basel rewrite key points attached to info to hand and we have a package capable of attracting supporters?

At this point I am well out of my ‘banking’ depth. What has to happen to make the fix a reality? How do we make it happen? Maybe a copy to each G20 nation?

The bank regulatory bible is called Basel II and you can find it here:
http://www.bis.org/publ/bcbs128.htm

In its 347 pages you will not find one single word about the purpose of the banks because the only purpose for the regulators was that no bank should default. Well I do not care one iota for the banks not defaulting if that does not make the world a better place, and I do not care one iota if banks default but leave progress in its wake.

And so, the first thing to do is to define the purpose of our banks. Once that is done you will immediately see that you must scratch the whole Basel paradigm and start from scratch, the sooner the better.

Why is this so? Because the basic pillar of the Basel regulations is the capital requirements based on perceived risks. For instance if a bank lends to an AAA rated client it is only required to hold 1.6 percent in capital but when lending to an ordinary unrated client then he needs 8 percent. That 6.4 percent difference in bank capital, which costs a lot, amounts to an arbitrary tax on risk… which is pure lunacy, for various reasons:

Not the least because just the fact that something is perceived as having less risk does not make it more worthy of financing.

Not the least because most often what is perceived as having a low-risk will, on its own, induce more carelessness than that which is perceived as risky… so much that one could even make a case for higher capital requirements for what is perceived as less risky.

Not the least because to decide the perceived risk the regulators appointed the credit rating agencies and with that doomed these to be captured by special interest… and of course, as human fallible agents, they were sooner or later doomed to make a mistake… like when their AAA signs lead trillions of dollars over the subprime cliff.

Not the least because then we breed bankers who specialize in reading the changes of opinions of their credit rating agencies instead of reading their clients.

Not the least because the regulators trusting their risk sentries then go to sleep.

And the list might include some other points that at this late time of the day escape my mind.

And so we need to get rid of the minimum capital requirements based on risk, which of course has to happen over a period of time, if one wants to avoid freezing up the system… alternatively we must complement the regulators risk-weight with our purpose-weights.

On TBTF you are right in that I would start by going the separation route but also fixing some absolute limits on market share participation.

On derivatives the more we get into standards and efficient clearing houses the better but there is no reason to prohibit them outright. I would though prohibit the naked speculation on socially unacceptable outcomes… just the way smoking and dogfights are prohibited.

On bank oligarchs I believe that doing the above already takes care of much but I would not find regulatory autocrats acceptable either.

Then I have some other side issues too… like controlling the role of the credit scores, and which in my mind is just an instrument to cheat borrowers into believing that the rates they are being charged are objective rates. As a foreigner in this country I have been sadden hearing parents almost worrying more about their children credit scores than their grades.

I completely disagree that what i said was nonsense. The only thing i agree on is that focus on the oligarchs is only one part of the problem…in my opinion, the breaking up of the banks is like cutting up a worm…without ENDING THE FED, we will always have a corrupt power machine legislating criminality.

Please ask your reps and senators to support HR1207 and S604 respectively…here is a website to see if they are doing so:

The link below directs you to a site where you can look up contact info for your local elected officials. Just type in your zip code, then your elected officials’ contact info pop’s up and a personalized letter is there for you to copy and paste into a letter for you to either email, fax or mail to your representatives, and senators. I suggest you also take this link, and this info and email it to ALL your contacts—if WE THE PEOPLE don’t use our power to VOTE, we may lose our republic! Our future has been robbed and it is time for justice!

http://www.ronpaul.com/2009-07-21/ron-paul-ask-your-senators-to-support-audit-the-fed-bill-s-604/

(I was trying to reply to your reply, but there was no reply button)

OK, i agree with you that the problem is TOTALLY bigger than just breaking up the bank oligarch’s, but, it is a victory that a once IMF “higher up” has taken on the GOLIATH bank oligarchs! I COMPLETELY feel your frustration, and the only thing that i know is that we all have to learn, and all need some fast paced learning–Simon INDEED has modified and evolved from the apparent position noted in the quote you gave us, and the same can be said for anyone who is trying to turn back the veil of propoganda that we are fed day in and day out by our main street media.

I am sorry i never read your blog before, and now, i will hear your voice, thank you!

I see from your post that the problem is
1. TBTF banks (crisis detonators)
2. Basel capital requirements rules based on risk
3. Bank oligarchy (but not primarily)

Does the over the counter derivatives market currently estimated at over $500 trillion contain any cause agents? I gather this market is unregulated?

May I assume you therefore believe corective action is:
1. Reduce TBTF banks (probably by restoring the separation between normal banking services and the merchant banking exotica?) Also by defining some scale limit and ensuring they are NOT TBTF?

2. Rewriting the Basel regulations in some way? (I think you have some correction in mind)

3. Banking oligarchs power limitation? I have no idea what your thoughts are re this issue.

4. Regulating the derivatives market?

You can deduce from this that I am interested in learning of the fix and what we can do to have the people with authority put the fix in place. Your contributions to date are much appreciated and I look forward to further gems of information.

Would you care to correct/refine/replace the issues and causes list and then define what are the fix actions required?
thanks and regards

thank you
I listened to that Moyers piece twice and I still do not know what Mr. Johnson wants people to do
- I felt proselytized but to which end?
- all this accusing is nice and good but besides “oh finally somebody is speaking my mind” there is no gain, no knowledge in it for me