Resident Fellow Alex J. Pollock

Sir, Many thanks for John Kay's excellent column "Our banks are beyond the control of mere mortals" (July 8). He is so right that it is not a matter of stupidity or incompetence. As Walter Bagehot said, it is "the ablest and cleverest the most" who in the fever of the boom "trade far above their means".

I believe the explanation is at bottom simple: leverage. No one, no matter how able or clever, can run an organisation taking serious risks that is also leveraged up to 20 or 30 or more times equity, without crashing from time to time.

There is just too little margin for the inevitable errors and unpleasant surprises in a dangerous and uncertain world.

Alex J. Pollock is a resident fellow at AEI.