We don’t always agree with Simon Johnson, former Chief Economist at the IMF & founder of The Baseline Scenario blog. He notably blew it big-time by predicting the so-called / self-styled / alleged Financial Crisis Inquiry Commission was going to produce a “Pecora moment,” equivalent to the New Deal-era hearings that blew the doors off the Wall Street shenanigans that helped cause the FIRST Great Depression.
As we all know, it continued the US elite’s “omerta” on the TB TF-induced and -perpetuated disaster through which we’re now living — but when he’s right, he’s right.
He totally slammed the inexplicably worshipped D-Bank CEO Josef Ackermann in an interview with the left-wing German daily Die Tageszeitung and reported on by the often intriguing Spiegel On-Line for
Ackermann’s famous target of a 25 per cent pretax return on equity. Johnson said such returns were only possible because Ackermann knows that Deutsche Bank is too big to fail and that it would be “rescued by taxpayers” if it was faced with bankruptcy.
He also correctly noted
there is the danger of a new crisis occurring if capital rules for banks are not made significantly tighter. He said the new Basel III rules — which will require banks to hold top-quality capital equal to at least 4.5% of assets by 2015, rising to 7 by 2019 — are “absolutely useless.” Instead, he argues, bank capital reserves have to be equal to between 20 and 45 per cent of total assets. Deutsche Bank currently has a capital ratio of just 4 per cent.
Where on earth did big bankers EVER get the image for being responsible with other people’s money ?
Last I can remember, it was Jimmy Stewart in It’s A Wonderful Life ;-) — and that’s a long time ago.