The regulators took us back to the dark ages!

Sir, though I agree with most of John Kay’s “Could Napoleon have coped in a credit crunch?” October 29, I protest when he says that “The financial innovation that was once the means of spreading risks is now an unmanageable source of instability.” The source of instability was not the financial innovations per se; the prime source of instability was that those financial innovations were rated triple-A and that we so much believed in the ratings.

In Against the Gods Peter L. Bernstein (John Wiley & Sons, 1996) wrote that the boundary between the modern times and the past is the mastery of risk, since for those who believe that everything was in God’s hands, risk management, probability, and statistics, must have seemed quite irrelevant. Now and as far as I am concerned, when the bank regulators put so much faith into the credit rating agencies, they inadvertently took us back to the past.