September 30, 2008
In the wake of the financial meltdown, governments are taking steps to ensure its containment, ultimate recovery and how to prevent a recurrence. Individual countries have lost to globalisation their sovereignty to act alone. They can only recover it collectively by introducing an effective system of multilateral governance, certainly not by economic nationalism
As Philip Stephens puts it, government have been left with responsibility but without power. The extent to which the cause of the current disaster is lack of sufficient regulation or a failure to implement effectively the existing regulations remains to be seen: I expect both are to blame.
And we should not ignore human greed, likely gross negligence – if not fraud – and a loss of morality. Banking and investment used to be based substantially on mutual trust between institution and customer and between institutions and the peer pressure exercised in a relatively closed society. Neither exist any longer.
It is this lack of trust that makes solutions to the credit crunch so hard to find. Who is there left to trust?
Gone are the days when the banker first decided whether the customer’s proposal made sense for the customer and whether the customer was a good risk; and only then considered the security aspects. Today the private banker is also selling a commodity.Author : Stanley Crossick