Safety Of
Mortgages & Sovereign Debt Conveniently Presumed
If it is true that that the early Basel Accords strongly
presumed that mortgages or sovereign debt were safe, then these are dramatic
examples of colossal government failure. Worse, these were self-serving presumptions
to support certain notions of public policy like the promotion of widespread home
ownership and politicians’ unrestricted access to finance their prerogatives
(pet projects).
Government Debt
Has A Credit Risk Weight Of Zero
Basel I of 1988 primarily focused on credit risk. Assets
of banks were classified and grouped in five categories according to credit
risk. , carrying risk weights of zero (for example home country sovereign debt)
I am sure that elected politicians think of themselves as
responsible acting people who know how to handle other people’s money. If
history is any guide, this is pure baloney. Elected politicians cannot be
trusted with our money.
Causing The Great
Recession
The latest financial crisis (2007-2008) was not least
caused by such stupid, politically motivated presumptions that were enshrined
in the Basel Accords.
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