excessive regulatory risk adverseness caused the crisis 5412

8/2/2019 Excessive Regulatory Risk Adverseness Caused the Crisis 5412

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Excessive regulatory risk-adverseness caused the crisis

Per Kurowski

This draft May 5, 2012

Abstract

Data will not disclose the truth if analyzed under the lens of a wrong hypothesis. This paper

agues the inapplicability of most popular hypothesis in explaining the current ongoing financial

crisis, the usually accused, and proposes, as an alternative hypothesis, that it was caused by an

excessive regulatory risk-adverseness, introduced by means of capital requirements for banks

based on the perceived risks of default which were already cleared for by the market. Much

lower capital requirements for what was officially perceived as not risky allowed the risk-

adjusted rate of return set in the market for what was perceived as not-risky to be leveragedmuch more and thereby produce a much higher expected return on bank equity than what was

officially perceived as risky.

Authors email:[email protected]
mailto:[email protected]:[email protected]:[email protected]:[email protected]


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INTRODUCTION

The possible Big Bang that scares me the most, is the one that could happen the day those

genius bank regulators in Basel, playing Gods, manage to introduce a systemic error in the

financial system, which will cause its collapse An Op-Ed in the Daily Journal, Caracas,

Venezuela, 1999.

Everyone knows that, sooner or later, the ratings issued by the credit agencies are just a new

breed of systemic errors, about to be propagated at modern speeds A letter published 2003 in

the Financial Times.

We believe that much of the worlds financial markets are currently being dangerously

overstretched through an exaggerated reliance on intrinsically weak financial models that are

based on very short series of statistical evidence and very doubtful volatility assumptions A

formal statement delivered in 2004 as an Executive Director of the World Bank.

And in 2008 the AAA-bomb exploded!

Data will not disclose the truth if analyzed under the lens of a wrong hypothesis and the

chances of getting out of the hole are immensely reduced by not knowing how you landed in it.

This paper agues the inapplicability of all most popular hypothesis in explaining the current

ongoing financial crisis, the usually accused, and proposes, as an alternative hypothesis, that it

was caused by an excessive regulatory risk-adverseness, introduced by means of capital

requirements for banks based on the perceived risks of default which were already cleared for bythe market. Much lower capital requirements for what was officially perceived as not risky

allowed the risk-adjusted rate of return set in the market for what was perceived as not-risky to

be leveraged much more and thereby produce a much higher expected return on bank equity than

what was officially perceived as risky.


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THE USUALLY ACCUSED HYPOTHESIS

The following hypotheses, arguments or narratives, in their narrow or wide forms, might

effectively cover more than 99.9 percent of the explanations given by the experts for the current

and ongoing bank and financial crisis in Europe and the US.

1. Banks and bankers took on excessive risks.2. Badly aligned incentives present in the excessive bonuses paid to bankers caused bad

decisions.

3. Malice, corruption and other evils!4. Banks were deregulated, like for instance by the repeal of the Glass-Steagall Act; and as

the result of regulators relying increasingly on the invisible hand of the market.

5. The shadow banks!6. Governments intervened excessively in the housing market, like for instance through

Ginnie and Fanny Mae.

7. Cronyism: Regulators were captured.8. Credit Rating Agencies were captured or failed to perform.9. The excessive financial flows, resulting from excessive macro-economical imbalances,

on a global basis, and within Europe, were unmanageable.

10.Mark to market accounting deepened the crisis11.Flawed originate-to-distribute securitization caused the crisis12.A bubble in the housing market13.The financial risk models used by the banks were flawed.14.Derivatives and other sophistications.15.Its all the fault of the too big to fail.


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16.A Black Swan!The list of the usually accused has been accumulated from a variety of sources. One that gives

a good introduction to the theme is Reading About the Financial Crisis: A 21-Book Review by

Andrew W. Lo1


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It is my contention that the following alternative hypothesis is more correct than any of the

usually accused:

THE EXCESSIVE REGULATORY RISK-ADVERSENESS HYPOTHESIS

This alternative hypothesis holds that since the banks and the markets already cleared for the

perceived risk by means of interest rates, amounts of loans or investments, and other terms of

contracts, when regulators also based their capital requirements much on the same perceived

risks, the pillar of their regulations, they doomed the banking system to overdose on perceived

risks of default.

As a consequence banks developed the excessive exposures to what was officially ex-ante

perceived as not-risky and which caused the crisis, and insufficient exposures to what was

officially perceived as risky which in its turn makes it so difficult to solve the crisis.

Though the original flaws with capital requirements for banks based on perceived risks can betraced way long back, these were given their truly distortive boost with the approval of Basel II

in June 20042.

When mentioning the capital requirements of Basel II, I will be referring to The Standardized

Approach in The First Pillar Minimum Capital Requirements pages 15 to 22 of Basel II.Though an Internal Ratings Based Approach was permitted for some of the bigger

international banks, it is clear that the Standardized Approach set the tone, and the floor, for the

risk-modeling implied in Basel II. For all practical purposes the following 2 tables suffices toillustrate those capital requirements.

Table 1. Basel II capital requirements for banks: Claims on sovereigns

Credit Rating Risk Weight Capital Required Allowed Leverage

AAA to AA 0% 0.0%

A+ to A 20% 1.6% 62.5 to 1

BBB+ to BBB- 50% 4.0% 25.0 to 1

BB+ to B- 100% 8.0% 12.5 to 1

Below B- 150% 12.0% 8.3 to 1

Unrated 100% 8.0% 12.5 to 1

Table 2. Basel II capital requirements for banks: Claims on corporates

Credit Rating Risk Weight Capital Required Allowed LeverageAAA to AA 20% 1.6% 62.5 to 1

A+ to A 50% 4.0% 25.0 to 1

BBB+ to BB- 100% 8.0% 12.5 to 1

Below BB- 150% 12.0% 8.3 to 1

Unrated 100% 8.0% 12.5 to 1


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Some have mentioned that Basel II never entered into effect in the US and so therefore it could

have nothing to do with creating the crisis. That is not the case. Once Basel II was approved in

June 2004, most US banks counted on it being implemented, and started, naturally, to build up

their assets accordingly. Also, already on April 28, 2004 in an Open Meeting, the SEC

already delegated part of the calculations of the capital charges for broker dealers and investment

banking holding companies to the Basel Committee for Banking Supervision.3

The excessive regulatory risk-taking hypotheses which is the same as an insufficient

regulatory risk-taking hypotheses is of course hard to understand and accept by all those

looking exclusively at the crisis with an ex-post lens or as Monday morning quarterback.

In this respect I have over time needed to develop some narratives that allows the message to

sink in. I here include a couple of these:

The empirical evidence

All bank crises ever have resulted from excessive lending to or investments in what wasperceived as not risky but turn out to be risky, and no crisis ever has resulted from excessive

bank lending to what was, ex-ante, perceived as risky. All in accordance with Mark Twains

expectations ofA banker is a fellow who lends you his umbrella when the sun is shining, but

wants it back the minute it begins to rain.

Based on the empirical evidence, if forced one could even make a case for capital requirements

for banks based on perceived risk that were 180 degrees opposite the current one, namely one of

higher capital requirements the lower the perceived risks.

Where are the real systemic risks and where did regulators go?

In its most simplified terms the following quadrangle represents the ex-ante/and ex-post result

possibilities for bank lending with reference to perceived risk

Ex-ante: Not-Risky - Ex-post: Not Risky:- Poses little risk of any major upset, as theoutcome should be quite aligned with what was expected.

Ex-ante: Not Risky - Ex-post: Risky:- This group I poses a real systemic threat, in termsof possible huge exposures gone wrong.

Ex-ante: Risky - Ex-post: Risky:- Having been perceived as risky these not only probablydo not signify a major exposure, and would also have been priced in accordance with a

higher perceived risk, which helps to compensate for the losses of those in the group

Ex-ante: Risky - Ex-post: Not Risky:- Only pleasant surprises.


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Unfortunately, the regulators set up a system that disregarded completely the existence of

the systemic risk present in number 2 and disregarding the benefits for society present in

number 4.

Golf!

What would happen to the game of golf if handicap officers allowed the good players (like you)

to use more strokes and penalized the bad players (like me) taking away strokes?

Horse-races!

What would happen to horse racing if the good winning horses were allowed to carry less and

less weights than the not so good losing horses?


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DISCUSSION

The following discussions of The usually accused hypothesis will mostly be based on

trying to ascertain:

a.-How well each of the hypotheses can explain the specific detonation of what I have called

the AAA-bomb, and which caused the crisis, namely a serie of excessive lending to and

investments in what was originally officially and ex-ante deemed as not-risky, but which, ex-

post, turned out to be very risky among other as a result of dangerously overcrowding the safe

havens.

These obese and failed bank exposures includes: the triple-A rated securities collateralized with

mortgages awarded to the subprime sector in the USA; infallible sovereign debts like that of

Ireland and Greece; safe banks such as those of Iceland banks; safe real-estate sector exposure

like that in Spain; and finally derivatives where the counterparty risk had not been adequatelyunderstood, or priced, like in the case of the AAA rated AIG.

b.-How well each of the hypotheses stands up against the explicative power of our

alternative hypothesis.

1. Banks and bankers took on excessive risks. When what we face are excessive outright obese bank exposures to what was officially

perceived as absolutely not risky, and its sub-product of anorexic exposures to what was

and is perceived as risky exposures, like lending to small businesses and entrepreneurs,

the notion of excessive risk-taking being the cause of it all, is more than ludicrous, and it

can only be explained as a natural ex post reaction to a crisis.

The confusion between what is perceived ex-ante as risky and not risky, and betweenwhat turns out ex-post to be risky or not risky, permeates the whole debate.

2. Badly aligned incentives present in the excessive bonuses paid to bankers causedbad decisions.

Bonuses that were badly aligned with the long term results of the financial sector playedindeed a role, but, it was primarily the extremely low capital requirements which applied

when banks lent to or invested in what was officially perceived as not risky, which

produced the extremely high returns on equity, which in its turn allowed and justified

the payment of the extravagant bonuses. Had for instance all Riskybank lending or

investing required these to hold the basic Basel II capital of 8 percent, the returns on bank

equity, and therefore the bonuses paid would have been much smaller.


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3. Malice, corruption and other evils! Indeed these always exist and that is why it behooves the regulators not to offer the

apples of temptation. To hit down primarily or exclusively on the bad mortgage

originators, without considering the whole value chain of the business model, is a good

way to allow the most guilty to escape any accountability.

4. Banks were deregulated, like for instance by the repeal of the Glass-Steagall Act;and as the result of regulators relying increasingly on the invisible hand of the

market.

The use of the word deregulated seems to be completely out of place when consideringthe fact that regulators, like never before, basically micromanaged the banks by setting

their standard risk-weights in order to determine the capital requirements for eachasset. What was unfortunately invisible for the markets was how the regulators were

distorting the markets with this.

Europe had nothing like the Glass-Steagall Act and yet it also suffered an explosion ofthe AAA-bomb, namely that of excessive bank exposures to what had been perceived as

not risky.

In fact, when for instance compared to the much lower leverages permitted by themarkets to unregulated entities such as hedge-funds, it is possible to determine that had

the banks been totally deregulated, and not officially authorized to leverage as much as

they did, another crisis might have happened, but not this one and none this large and

systemic.


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5. The shadow banks! The shadow banks represent the theory that it all started in the not regulated area of

banking Indeed though that area is often used to avoid regulations it has much less

capability of leveraging bad business than the formal regulated sector. As an example the

hedge funds, on their own, rarely exceed a 10 to 1 leverage calculated on gross not risk-

weighted assets, while Basel II led European banks to leverage way over 40 times to 1

similarly calculated.

6. Governments intervened excessively in the housing market, like for instancethrough Ginnie and Fanny Mae.

There is no question that governments intervene the housing markets in many wayswhich distort, both in the US and Europe, but they have been doing so for a very long

time, and in Europe, the US type of Government Sponsored Entities do not existTherefore, though the issue is relevant in general, it is not useful to explain this crisis.

More important for instance in Spain, were the low capital requirements allowed the

banks when entering the real estate market again because it was officially perceived as

safe.

7. Cronyism: Regulators were captured Regulators and credit rating agencies are of course always exposed to being captured by

interested parties, but those risks are also the results of setting up a regulatory system

which generates a market in capturables, like for instance by using a system of risk-

weights which depend on the credit ratings. In other words, had for instance the basic

capital requirement of 8 percent of Basel II been applicable to all assets, there would have

been so much less inventory available for regulatory capture.

According to our alternative hypothesis, once the original intellectual regulatory capturehad become a reality, installing the reign of the paradigm of more-perceived-risk-more-

capital and less-perceived-risk-less-capital, everything was doomed to go downhill from

there.

8. Credit Rating Agencies were captured or failed to perform. Of course the Credit Ratings Agencies failed, as they had to, sooner or later. In January

2003 I ended a letter to the editor published in the Financial Times with Everyone

knows that, sooner or later, the ratings issued by the credit agencies are just a new breed

of systemic errors, about to be propagated at modern speeds.


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But what caused the crisis was not the failure of human fallible rating agencies but thefact that the banks had been instructed to take their opinions into account excessively.

The credit rating agencies have been around for ages but never ever before, did they

cause such a systemic risk.

The regulators should always be concerned with the credit ratings being wrong, butunfortunately, by using these ratings to establish the capital requirements for the banks,

they basically bet the banking system on the credit ratings being correct.

In an almost perverse way, the better the credit agencies perform and the more they aretrusted, the greater systemic risk they constitute.

9. The excessive financial flows, resulting from excessive macroeconomic imbalances,on a global basis, and within Europe, were unmanageable.

Clearly the flows from macroeconomic imbalances fed the crisis, but they do not explainwhy these flows ended up so much as feedstock of the AAA-bomb.

One can also make a case that many of the macroeconomic imbalances would have beencorrected were it not for regulations that permitted their easy financing. For instance if a

German bank had to hold when lending to Greece the same 8 percent in equity it needed

to hold when lending to a German small business, instead of the meager 1.6 percent, 5

times less, it is hard to visualize a German Bank lending to Greece as much as it did.

10.Mark to market accounting deepened the crisisMark to market, just as credit ratings, acting as messengers of the bad news in a pro-

cyclical way, deepened the crisis, but never caused it, as that was done by the bad lending

and the bad investments.

11.Flawed originate-to-distribute securitization caused the crisis. The explosive growth of badly awarded mortgages to the subprime sector to berepackaged in securities that were rated AAA, and which initially detonated the crisis had

very little to do with the demand of mortgages and everything to do with the demand for

AAA-rated securities, because these, according to Basel II, where going to be (US) or

were allowed to be held (Europe) by the banks against only 1.6 percent in capital,

implying and astonishing 62.5 to 1 permitted marginal leverage.


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And the demand for these securities was not only from banks. When lending to investorsagainst these securities as collateral, these loans could be held by the banks against very

little capital, and so that generated stimulated the over-leveraging in all financial markets.

Over the years I have argued in many articles that, if the market is not capable of

satisfying the demand of real AAA paper, then the market, being a market, will find a

ways to supply fake Potemkin rated AAA paper.

12.A bubble in the housing market. In Spain we can indeed talk about a bubble in the housing market, but one resulting

primarily from our alternative hypothesis, namely the fact that banks were allowed to

finance the housing and real estate market holding very little capital, which allowed for

high leverages of equity, which in its turn allowed for very high returns on bank equity.

But, in the USA, it could be more correct to attribute the crisis to a bubble in AAA ratedsecurities backed by mortgages than to a bubble in the housing market. Those about a

trillion of Euros coming in from abroad into the US housing market, were not looking for

housing markets, they were exclusively looking for AAA ratings.

13.The financial risk models used by the banks were flawed. Indeed, in October 2004, in a formal written statement delivered at the Board as an

Executive Director of the World Bank I warned We believe that much of the worlds

financial markets are currently being dangerously overstretched through an exaggerated

reliance on intrinsically weak financial models that are based on very short series of

statistical evidence and very doubtful volatility assumptions

But that is not really the issue here, since financial risk models, like credit ratings,prepared by fallible humans, can always turn out to be wrong. The real problem was that

bank regulators, instead of preparing for the consequences of such financial risk models

being wrong, they bet our banking system on these models being right.

14.Derivatives and other sophistications. Sophistications, as derivatives, always roll pleasantly on the tongue of those trying to

give an nice sounding explanation for the crisis, but, the fact is that standing on their

own, independently from banking regulations, derivatives had very little to do with

causing the crisis.


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As an example it is clear that AIG would never ever have been able to sell their creditdefault swaps at the volumes and the prices they sold these had it not been for the fact

that AIG was AAA rated and therefore provided the buying banks the access to minimum

minimorum capital requirements.

15.Its all the fault of the too-big-to-fail. Of course the too-big-to-fail-banks are an important component of our current crisis, but,

the question that needs to be answered is more the one of how did they became too big

to fail? In that respect it suffices with establishing that minimalistic capital requirements

for banks, which allows for maximum leverages, are the best imaginable growth

hormones for too-big-to-fail banks.

In May 2003, as an Executive Director of the World Bank I addressed over a hundredbank regulators, working on Basel II, in a risk management workshop at the World Bank,with the following words:

There is a thesis that holds that the old agricultural traditions of burning a little each

year, thereby getting rid of some of the combustible materials, was much wiser than

todays no burning at all, that only allows for the buildup of more incendiary materials,

thereby guaranteeing disaster and scorched earth, when fire finally breaks out, as it does,

sooner or later.

Therefore a regulation that regulates less, but is more active and trigger-happy, and treats

a bank failure as something normal, as it should be, could be a much more effective

regulation. The avoidance of a crisis, by any means, might strangely lead us to the one

and only bank, therefore setting us up for the mother of all moral hazardsjust to

proceed later to the mother of all bank crises.

Knowing that the larger they are, the harder they fall, if I were regulator, I would be

thinking about a progressive tax on size. But, then again, I am not a regulator, I am just a

developer.4

16.A Black Swan!

This is the catch all of what is left hypothesis an unpredictable event. And this is whatregulators would most love us to believe as it that would free them of responsibilities.

They wish! Forget it! This was no Black Swan it was a completely manmade Swan, byregulators who should have known better.


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I recently heard a video where Nassim Taleb mentioned that there is no word for anti-fragility.5 Wrong! Anti-fragility is risk-taking and that is why, in so many of our

Western World churches, we can hear the prayer of God make us daring!

Risk taking, a lot of it and of many different kinds, is not only the oxygen of growth italso provides our financial system with the Lebensraum it needs to grow sturdy. Our

current problem is that our nanny bank regulators in the Basel Committee completely

forgot all about it or perhaps they never knew.


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POLICY PRESCRIPTIONS

If accepting the alternative hypothesis, the following policy prescriptions would seem natural:

There is a need for a more transparent, diversified and multidisciplinary regulatory

approach. The wider the area of influence of regulations is, for instance when they are global,

the more need there is to avoid regulating by means of a mutual admiration club of regulators

which can foster degenerative incestuous prescriptions; and to guarantee the openness and the

diversity in the public debate of those regulations. As an example, during discussions I have

obtained the impression that the inclusion of an expert in contagious diseases in the Basel

Committee for Banking Supervision would have been extremely useful in order to avoid some of

the biggest flaws in current regulations.

Hit reboot! Sometimes you need to start with a clean slate. When the mistakes in the regulations

are too profound there is a need for a totally clean slate of regulators, so as not to lose time in theconstruction of excuses. In other words there is also a need for accountability among regulators.

At this moment the producers of failed Basel II have either been promoted upwards or placed in

charge of producing Basel III. Hollywood would never allow such a thing!

The purpose of banks: Regulations must begin by defining and obtaining a consensual

agreement on the purpose of the regulated entities. One of the most amazing things with current

bank regulations is that nowhere can we find the mentioning of what the purpose of the banks is.

In this respect it is like a regulator regulating the construction of a road without concerning

himself with from where it comes and to where it goes and who will travel on it.

In this respect we need to stop concentrating on the bust, the crisis, and start looking at what was

produced by the whole boom-bust cycle. Though I do not favor regulatory distortions, to make

illustrate the issue of purpose, I frequently mention the possibility of capital requirements for

banks partly adjusted for perceived sustainability and job for youth creation values.

Regulations are by itself the potential source of immense systemic risks. Any regulatory

intervention must be defined as a potential systemic risk, and its possible consequences clearly

need to be identified a priori and so that the required monitoring mechanisms can be set up.

We need more counter-cyclical bank capital adjustments. If in a case like the current crisis

banks were not required to have sufficient capital/equity when they placed the perceived low-risk

assets on their books, there is no need to make pro-cyclicality worse by requiring an immediate

adjustment of bank equity. New bank equity should support new needed lending not remedy old

mistakes.


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Simplicity and transparency. The simpler and more transparent regulations are, the less prone

they are to be captured. The market in regulatory capturables has to minimized in order for the

markets to work without distortions.

Stop discrimination. The artificial regulatory discrimination against those perceived as risky,

those already naturally discriminated against by the market, must end, lest the regulators have

decreed a new class of untouchables. Simplified off-the-cuff calculations would show those

unrated having to pay about 270bp more in interest rates than those rated AAA, just to make

up for the regulatory discrimination.6 Let us never forget that no matter how large the costs of the

current financial crisis are, the opportunity cost for the society of what was not financed because

it was risky might be larger.

Risk-taking. The importance of risk taking both as the oxygen of growth and as what provides

the financial system with the Lebensraum it needs to be sturdy must be realized. The risky

small businesses and entrepreneurs are the real sparkplugs to get the engine of economic growthgoing and we must see to that they are put back in the system.


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FINAL COMMENT

If this alternative hypothesis is true, and which would therefore point to the bank regulators

having been 180 degrees wrong, as for instance one could make a case for capital requirements

for banks which are higher when the borrower is perceived as absolutely not risky why has it

not gained more traction? That is a question I often received and to which I responded:

1. There are many who are not that interested in explaining the crisis but are more lookingto exploit it for their own ideological agendas. And there are of course also those

interested in the truth not coming out.

2. It is truly mindboggling and hard to believe that those in charge of regulating the bankson a global basis can get it so wrong Theres got to be something that Kurowski has

missed syndrome. To this I can only refer to Edward Dolnicks The forgers spell

which provides some of the best clues as to how come expert regulators created thetruly nutty bank regulations that slowly but surely is taking the Western world down.

Dolnick does so by quoting Francis Fukuyama in a TV program saying that Daniel

Moynihan opined There are some mistakes it takes a Ph.D. to make. And he also

speculates, in the footnotes, that perhaps Fukuyama had in mind George Orwells

comment, in Notes on Nationalism, that one has to belong to the intelligentsia to

believe things like that: no ordinary man could be such a fool.

3. Bank regulations are not a sexy issue and most economists treat these with the same oreven less respect they would give an IKEA bed-sofa assembly instruction.

1Reading About the Financial Crisis: A 21-Book Review by Andrew W. Lo, Draft of January 0,

2012 prepared for the Journal of Economic Literature.

2Basel II: International Convergence of Capital Measurement and Capital Standards: aRevised

Framework June 2004http://www.bis.org/publ/bcbs107.pdf

3http://subprimeregulations.blogspot.com/2009/12/day-sec-delegated-to-basel-committee.html

4Voice and Noise, Per Kurowski, Booksurge, 2006http://www.amazon.com/Voice-Noise-Per-

Kurowski/dp/1419620827

5http://www.farnamstreetblog.com/2012/04/nassim-taleb-economic-recovery-perils-politics-and-possibilities/

6http://subprimeregulations.blogspot.com/2011/11/basel-iis-regulatory-discrimination-of.html
http://www.bis.org/publ/bcbs107.pdfhttp://www.bis.org/publ/bcbs107.pdfhttp://www.bis.org/publ/bcbs107.pdfhttp://subprimeregulations.blogspot.com/2009/12/day-sec-delegated-to-basel-committee.htmlhttp://subprimeregulations.blogspot.com/2009/12/day-sec-delegated-to-basel-committee.htmlhttp://subprimeregulations.blogspot.com/2009/12/day-sec-delegated-to-basel-committee.htmlhttp://www.amazon.com/Voice-Noise-Per-Kurowski/dp/1419620827http://www.amazon.com/Voice-Noise-Per-Kurowski/dp/1419620827http://www.amazon.com/Voice-Noise-Per-Kurowski/dp/1419620827http://www.amazon.com/Voice-Noise-Per-Kurowski/dp/1419620827http://www.farnamstreetblog.com/2012/04/nassim-taleb-economic-recovery-perils-politics-and-possibilities/http://www.farnamstreetblog.com/2012/04/nassim-taleb-economic-recovery-perils-politics-and-possibilities/http://www.farnamstreetblog.com/2012/04/nassim-taleb-economic-recovery-perils-politics-and-possibilities/http://subprimeregulations.blogspot.com/2011/11/basel-iis-regulatory-discrimination-of.htmlhttp://subprimeregulations.blogspot.com/2011/11/basel-iis-regulatory-discrimination-of.htmlhttp://subprimeregulations.blogspot.com/2011/11/basel-iis-regulatory-discrimination-of.htmlhttp://subprimeregulations.blogspot.com/2011/11/basel-iis-regulatory-discrimination-of.htmlhttp://www.farnamstreetblog.com/2012/04/nassim-taleb-economic-recovery-perils-politics-and-possibilities/http://www.amazon.com/Voice-Noise-Per-Kurowski/dp/1419620827http://www.amazon.com/Voice-Noise-Per-Kurowski/dp/1419620827http://subprimeregulations.blogspot.com/2009/12/day-sec-delegated-to-basel-committee.htmlhttp://www.bis.org/publ/bcbs107.pdf

excessive regulatory risk adverseness caused the crisis 5412

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