The US representatives at Basel probably thought themselves political moderates and mainstreamers – being in about the center and mainstream of Harvard University professors and the New York Times – which of course puts them far to the left of the American public, and a great deal further to the left of the people who created the banking system.
At Basel, the Americans were the “right wing”. The “center” and “mainstream” at Basel was a good deal further left. Thus the mainstream at Basel were people that the ordinary American would think far left crazies, and that those who reorganized the banking system after the great depression would have thought a bunch of bolshie nut cases who needed to be lined up against a wall and shot.
I don’t think the people at Basel consciously intended to destroy the old banking system, capitalism, or industrial civilization, but it was a bit like a great big bag of potato crisps. You eat one crisp, then you eat another, and before you know it you have emptied the bag. Because they hated capitalism, western civilization, and industrialization, they just loved making little changes, and they just kept making more and more and more little changes.
I don’t think anyone at Basel said “Now this is really going to destroy western civilization. hah haha haaahhhaah. Stick it to the evil white male protestant capitalist imperialist overlords, let us make them into third world peasants doing agriculture with digging sticks.” Rather, they intended the changes to be small, minor, and boring. They tried to make sure that every little regulatory change was as boring as possible, but we have tens of thousands, perhaps hundreds of thousands, of teeny weeny little regulatory changes, each promulgated by people who do not much like capitalism or western civilization or an industrial economy, thus the cumulative effect is quite large. How large is difficult to say, since no one, least of all the participants, understands Basel II. It is, however, apparent, that it turns the banking system completely up side down, abolishing a system where loans are made by a particular branch of a particular bank, and a particular branch manager is responsible for those loans.
The local branch bank manager is no longer responsible to make loans that get paid back. He is now instead responsible to make loans that conform to rules that supposedly ensure that loans will get paid back, which loans are then passed to some completely different organization. He is now responsible for the procedure, no longer for the results of that procedure. Thus the decision as to what is a safe loan is moved to politics and the government bureaucracy, far far away from anyone who knows the borrower or has actually seen the assets.
Thus financial capital is now centrally allocated by regulators – and therefore, in practice, is allocated without any regard for willingness, ability, or propensity to pay it back.
They really are a bunch of bolshie crazies. We will keep having trillion dollar bailouts till we line them up against a wall and shoot them.