@#$%&! Get Some Better @#$%&* Regulators!

commentary by Roger Erickson

A friend from India writes of a local bank that "Capital Adequacy Ratio as per Basel II guidelines is 16.5 percent well above regulatory minimum of 9 percent....translation...aggressive but financially not reckless.. ."

Yet this whole issue of "adequate capital ratio" for banks misses the entire point of having banks.

In a country with a fiat currency, banks are licensed by the state to provide accurate, honest credit evaluations. Thereafter, loans create (mostly) FDIC-insured deposits, and trigger bank-reserve notation with the CB (central bank).

Banks rarely, if ever, fail for lack of their own capital. They fail when fraudulent or incompetent bank managers arrange bad loans by various means that all fail the original banking license provisions. That, in turn, can happen ONLY when there is incompetent or dishonest bank regulation - usually per politics; usually per a complacent, lazy, foolish electorate.  There is an unbroken causality chain.

The solution?

An adequate regulatory ratio.

NOT just some arbitrary capital ratio.

(This ain't rocket science.)

Is an adequate capital ratio in banks like keeping extra gas in your car, in case the engine/transmission/brakes/drivetrain ever breaks down? What you really need is a better maintenance program, not just the personal risk of losing extra gas in the tank.  That's crude & unproductive thinking, and it doesn't stop crooks from arranging accidents and collecting the insurance money.

Why not just replace most banks & CBs with GoogleMoney, or some other cell phone app? And invest in a lot more banking maintenance instead?

Russell Huntley writes: "Good explanation, but capital requirements are becoming more of a focus [among limited intellect politicians] because regulators, don't trust the accuracy of the bank reporting."

Ya think? And do we trust the productivity of regulators, OR of politicians? ??

Weepin' Buddha on an incline! Start by getting some better @#$%&! regulators!!!  Then get some better politicians.  Then get a better electorate.  Do that or just kiss your grandchildren goodbye, tell 'em it's all faux love, and that you really don't give a rat's patootie about them or their future.  Be honest.

Do cops say they don't trust the self-reports of crooks, and ask for crooks to place bonded deposits?  No!  They walk their damn beats & make their own reports. Sheesh!

Ditto for electorates. Do NOT listen to crooks saying it's too expensive to regulate crooks. Just how dumb do we think we are?

In any organization, EVERY process it too important to be left to the presumed process owners.  That's what "organization" means.  Look up the word in a dictionary.  An organization is NOT a collection of complete Libertarians granted the miracle of unlimited, real-time calculation power enabling them to instantly evaluate infinite choices.  Return on coordination requires investment in the cost of coordination - which means everyone looking into everyone else's operations, to see how to compound team return.  That, for example, is why rugby is a great game.  It never stops, and requires all players to continuously auto-organize and  invent ways to benefit the team, no matter what the situation. Like business and reality, it's not scripted - except the general setting. Scripted politics produces slow, stupid policy.  We need fast and smart to craft successful national policy.

And while we're at it, get a better @#$%&! electorate. This one's getting what it deserves.

You hear that Joe & Jane SixPack? Time to get involved & read the manuals. You want a country that works? Then start acting like an owner again. Find out for yourself what everyone's job is (hint: they all work for you, every last one). Then, personally reassign* every last person who isn't doing their job. Today.

* Reassign, not fire.  No one shirks, no one hides, and all must be given meaning by contributing something, somewhere.  If we want a nation that succeeds, then everyone must be allowed to be a valued part.