Professor William Black:

Basel II was a very substantial contributor to the crisis, particularly in Europe. In the United States, because of heroic resistance by the Federal Deposit Insurance Corporation against the Federal Reserve economists, who are very much in favour of Basel II, we established a minimum leverage ratio. Therefore, leverage is roughly on average twice in Europe what it is in the United States in terms of the crisis. Leverage will magnify either gains or losses. If the FDIC had not done that, US losses would have been roughly twice as large. In fact, that is an understatement, because losses do not grow linearly but tend to grow exponentially in these circumstances. Yes, Basel II was a disaster, because it facilitated the recipe that I have just gone through - grow like crazy. It allowed massive growth. With extreme leverage, it allowed extreme leverage.

Is Basel III better? Yes, but Basel III is horrifically complicated. It would be vastly better to go back to much simpler rules. The position I am taking is, frankly, the majority position among people who are involved in regulation and economics.