The last giants standing, Goldman Sachs and Morgan Stanley, that have become deposit-taking banks is a significant milestone in the history of American Banking Reforms. This is exactly the opposite of what happened after the Great Crash of 1929.
One lesson that is to be remembered by the entire human race across any industry is that there are certain areas that cannot be left to the market forces to decide. For instance, the monitoring of Investment Banks by SEC. SEC is headed by executives that are influenced by the Investment Banks. Having preached the rest of world about regulation and compliance, it is a harsh reality to face in their own backyard. Thanks to ‘ruthless capitalism’, lobbying at the highest levels have undermined the interests of the common public across the globe.
The US government stepping in to control the major banking bodies, rather than outsourcing the control to SEC, is a good sign, assuming that the vicious cycle will not continue. Hank Paulson’s new state-owned organization that will have to convince a lot of key people on both sides of the aisle to print USD 700 billion (to buy all the toxic mortgages) is untypical of capitalism. Irrespective of the chaos and remedial proposals, the damage is already done to all geographies of the globe. The worst affected is the US public that are caught between unpaid mortgage bills and the mounting public debt (USD 11.3 trillion) that will be left for their future generations to pay. And we have not even begun to understand the current status of this monstrous turmoil that is complicated by complex derivatives.
Institutions with a conservative approach, simpler business models and meticulous management are the new heroes of today’s market.
Does this word ‘conservative’ sound familiar?
1 comment:
I guess the bottom line hovers around 'value' and the difference between 'value'& 'valuation' crreates chaos. Atleast here. Especialy so, when these two are at opposite ends of the spectrum
Post a Comment