July 22, 2017

FT, you have a fake understanding on what is wrong with current bank regulations, and you have silenced my real one

Sir, Gillian Tett, your US Managing Editor, referring to the responses to an article by her titled “Why a divided America has united against the media”, July 14, strangely published only in that FT Weekend Magazine I do not receive here in Washington D.C. writes: “Readers and viewers say they want the media to be “less biased” and to “focus on the facts” but the problem of how to finance and organise serious non-partisan journalism for the mass market remains largely unsolved. The trouble is that partisan social media is free – and readers seem to be hungry for this. So how can we support real news when most voters keep flocking to entertaining stories that are (at best) partisan and (at worst) deliberately fake?” “Want to change the media? Don’t get mad – get even”, also solely in FT Weekend Magazine, July 22. 

The following is a very brief version of my relation with FT, as an opinionated subscriber.

FT and its columnists, with relation to banks’ crisis and regulations, have consistently written about deregulation and excessive risk-taking.

I on the other hand and in that respect, have with over 2.500 letters to FT consistently written to FT about misregulation and excessive risk-aversion; which results in dangerous excessive exposures against too little capital to what is ex ante perceived as safe, like sovereigns, the AAArisktocracy and residential housing, but could ex-post be very risky; and too little exposures to what is ex ante perceived as risky, like SMEs and entrepreneurs.

As one of the frontlines on this issue of the risk-weighted capital requirements for banks we find that in Basel II regulators assigned a risk-weight of only 20% to what is rated AAA to AA, and that which therefore could be very dangerous, and 150% to what is rated below BB- and that by just that fact alone is ex-ante made so innocuous to the banking system.

In one sentence, regulators regulate the banks based on the ex ante perceived risk of the banks assets, and not based on the risk ex post of the assets for the banking system.

And my criticisms have included many other aspects… like for instance the runaway statism present in the risk weights of Sovereign 0% and citizens 100%.

But for soon a decade, my arguments have been met with absolute silence, because as one of you informed me, I was just obsessed with the issue. Sir, I am reporting on a regulatory bomb that is destroying the future economy for our grandchildren, and you really don’t want me to be obsessed?

Now Tett, one of the frequent recipients of my comments writes: “the next time you complain about the media, ask yourself how you expect “fair” mass-market journalism to be funded and run – and if you are willing to pay for it. That question doesn’t let journalists off the hook: we writers need to dignify our craft. But building a better media is a task that involves journalists and non-journalists alike. Being angry is not enough; we need solutions.”

Sir, it is quite worrisome to read “Without fear and without favour” FT’s Tett confessing to “commercial pressures that are increasingly encouraging private sector media outlets to be more partisan”. Have you informed your shareholders about this? I would see it the other way, the more fakes and partisanship there is in the media, the more valuable do bastions of truth and diversity become. Or not?

Shaming out fakes and partisans must also be part of societies responsibility. For instance I have started to look for a collaborator to write a book tentatively titled “Me, Subprime Banking Regulations and FT”