And if we had some eggs….

I wish we had some ham for if we had some eggs we could have ham and eggs.

Which is an odd thing to say about bank capital rations however:

If lenders are given time to adjust, David Miles told the London School of Economics, they could double capital ratios to around 20pc without hurting the supply of credit to households and businesses. Larger equity holdings would help prevent a repeat of the financial crisis, which caused an economic slump that is likely \”to be the longest of the six depressions since the First World War\”, he said.

Under an \”equity-for-debt swap\”, Mr Miles mapped out a system in which bank investors could replace holdings of bonds with shares. Such a structure would not restrict lending, he claimed, because it would leave the funding side of balance sheets unchanged.

But it does seem to be what David Miles is saying.

Doubling capital ratios across the world \”might mean new equity of close to $1 trillion\”, he said. Raising fresh funds would be \”a huge challenge\”, but a \”portfolio switch\” by investors would not \”require an increase in overall funding\”.


His said his proposal \”does not impose substantial costs on banks … but the likelihood of banking crises would fall substantially\”.

Well, yes, this is true. If investors are happy to convert $1 trillion from the current bond financing into equity financing then it would be possible to double bank equity ratios and it wouldn\’t cost all that much.

It asll depends upon whether investors want to convert the steady interest income into variable dividend income. Not sure whether that\’s the ham or the eggs but that is the important question which is as yet unanswered. If they are, great, if they\’re not…..

1 thought on “And if we had some eggs….”

  1. I can give you the answer.

    If the investors had wanted dividends rather than interest, they would not have bought bonds in the first place.

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