Lessons from the Credit Crunch

It is too early to fully understand how it could happen that the World's Financial System got close to a global meltdown during the past 12 months. Some blame greedy bankers, others lay the blame squarely at the foot of the (US) consumers. Institutional Investors also appear entangled as they allowed managements too much leeway and even egged them on to pursue ever-more risky expansion plans. However, we tend to think that regulators - and their paymasters the politicians - may have to take a large part of the blame.
Unfortunately they are the party that is the least likely to bear the full cost of their mistakes. Shareholders have to suffer from dramatically shrunken share prices, scores of bankers have lost their jobs, or are about to in the near future. Bureaucrats are happily engaged in the blame game and are joined by academics and media people who often are also less than objective in their judgement.

Impact of taking the King's Shilling

It is too early to assess the impact of the various bank rescue packages on the future structure of the banking and securities industry. The obvious inconsistencies, however, will put a serious spanner in the works for all those firms that will take the King's Shilling. While we are not condoning the excesses of the financial service industry we think that the way the regulators handled the developing crisis since the summer of 2007 was disgraceful and added fuel to the fire instead of containing it.

Inept Regulators

Every Age has his prophet, but 'Houdini' misses the key point: the Credit Crunch is a bush-fire where inept regulators allowed a bank-run to develop.