Friday, November 12, 2010

Wallis abandoned

Twenty leading economists have published a letter in the FT, declaring:
The Basel III bank-regulation proposals that G20 leaders will discuss fail to eliminate key structural flaws in the current system. Banks’ high leverage, and the resulting fragility and systemic risk, contributed to the near collapse of the financial system. Basel III is far from sufficient to protect the system from recurring crises. If a much larger fraction, at least 15%, of banks’ total, non-risk-weighted, assets were funded by equity, the social benefits would be substantial. And the social costs would be minimal, if any.

According to Banking Day:
The 20 include the University of Chicago’s Eugene Fama and John Cochrane, the London School of Economics’ Charles Goodhart and Princeton’s Markus Brunnermeier. Fama’s presenece is significant because of his role as originator of the “efficient markets hypothesis”, a concept frequently cited by proponents of financial deregulation.

The Wallis architecture is now openly bankrupt, abandoned even by its philosophical parent.


Anonymous said...

sadly, the banks are all powerful, particularly the major global players. their tentacles of influence are infinite, their grip vice-like.

they will bankrupt countries before themselves. alas, i feel some are too big to fail and with this knowledge they are omnipotent.

and why the hell is mike smith (anz) at the g20 in korea? even national bankers think they are masters of the universe!

Bear Feller said...

Anon, Smith is in Korea to buy up KEB. The essential plank in ANZ remaining the "growth stock" we all know and love.Anon, Smith is in Korea to buy up KEB. The essential plank in ANZ remaining the "growth stock" we all know and love.

Anonymous said...

Fallacies, Irrelevant Facts, and Myths in the Discussion of Capital Regulation: Why Bank Equity is not Expensive