It is no surprise that headlines a year after the collapse of Lehman Bros declare that the lessons of the financial crisis have not been learned and there is no sytstemic improvement in the financial system.
The Institute for Public Policy Research (IPPR) says the rapid return to the City’s bonus culture shows real reform has been “very limited”. Their report warned that unless urgent action is taken, the banking crisis may not be the last of its type.
US President Barack Obama has said “Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they [bankers] are choosing to ignore them.”
It is sad and frustrating to know that the root cause of the credit problem was moral hazard and that little has been done to highlight this or to force solutions.
But we expected it. A year ago politicians, regulators and top bankers were confused by the dynamic of a melt down that was inevitable. They created the environment for it to happen, though everyone is to blame for taking credit that they knew was stretching their solvency beyond reason. And for the past six months we have heard platitudes and optimism about a recovery which has pushed stock markets up, distracted everyone from needed reforms and allowed incumbent politicians, regulators and bankers to retain their vested interests, including massive pay packages and bonuses. Meanwhile the cost of money for anyone with a mortgage or other credit has gone up, while “interest rates” have come down.
I know that self-management is more efficient and enjoyable, but if it isn’t happening then regulation is the normal solution. With regulation comes inflexibility and higher transaction costs. Perhaps if a few more bankers were incarcerated, more high paid bankers , CEOs and politicians would start doing the job they are supposed to.
BBC: Bank crisis lessons ‘not learned’
BBC: Obama issues warning to bankers
BBC: Brown ‘appalled’ by bank bonuses
BBC: Track the $11tn of bailout spending and see what it means for the taxpayers who funded it
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