Wednesday, May 1, 2013

An American approach to banking

Regarding your April 29 Washington Post editorial “A diet for the big banks”:

It suffices to remember the saying about “a banker being that chap who lends you the umbrella when the sun shines but wants it back as soon as it looks like it is going to rain” to know that those assets perceived as safe are already much favored over those perceived as risky. The risk weights applied by the Basel III regulations and based on exactly those same perceived risks only increase the gap between “The Infallible” and “The Risky.”

And that is why I very much salute the bill by Sens. Sherrod Brown (D-Ohio) and David Vitter (R-La.) that looks to “require more capital and better capital but also limit the ‘risk-weighting’ of assets.” More capital is a perfectly legitimate requirement, but the imposition of risk weights is fundamentally incompatible with “a land of the brave.” The United States did not become what it is by avoiding risks.

That the bill puts the United States at odds with Basel III regulations does not matter, as those regulations have been proven harmful enough. On the contrary, Europe would also do better with a Brown-Vitter proposal.

Per Kurowski, Rockville

The writer was an executive director of the World Bank from 2002 to 2004.