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Islington Tribune - LETTERS TO THE EDITOR
Published: 24 December 2008
 
Don’t bank on markets

• SINCE September of this year most people were hit by a worldwide whirlwind of economic chaos that nearly led to a complete financial meltdown.
Libor (the way banks lend to banks), credit crunch, sub-prime mortgages (mostly in the United States), short selling, parachute payments and bank bailouts had entered the every day language for of us all. It was a surprise, not least to us, but to business CEOs, economists, politicians, and even bankers. But was it really a surprise?
An Islington businessman, an Armenian refugee, was amazed in early October when BBC TV carried the headline “Capitalism in crisis”. He could not stop laughing, as it seemed to him the world had been turned upside down.
So, why did this happen, what was its cause, who knew in advance, what could be done, was the cause of the crisis arrogance or avarice or both, and what were the roots of this crisis? Questions we should ask and have yet to be answered.
In July of this year the CEO of Lehman Brothers (a major American bank whose collapse signalled the beginning of the disaster) visited Ben Banake, the head of the US Federal Reserve, saying his bank had big problems. Several days earlier the same CEO took a bonus payment of over $26million on top of his multi-million dollar salary. He’s currently under investigation by the FBI.
When the metaphorical hit the fan in September financial markets worldwide took a plunge with hundreds of points falling off the FTSE and the DOW Jones on a daily basis. Confidence in financial markets was way down, homes were threatened, repossessed, and jobs lost. The effect of this crisis will be felt for years.
A top accountant and a banker told me back in early October, “the roots of this catastrophe can be traced back to the ‘Big Bang’ (the deregulation of the City and Wall St) in 1987”. Remember ENRON, the American energy giant that failed in 2001 after it was exposed that their accountants (Arthur Anderson) had “fiddled the books for years,” lying to staff, shareholders, markets, governments and us?
When President Bill Clinton left office in early 2001 the American economy was $500billion in credit. Now the world’s biggest economy owes $10trillion. It cannot afford a universal heath service – well, not after $3billion a month (for years) in expenditure on a war in Iraq, or the $1.5trillion bail out of banks and business.
A GCSE student doing home economics could have foretold the current crisis, as the numbers do not add up, and never did. Was it greed by us, and people who kept lending to boost their annual bonuses? Maybe the American comedian George Burns was right: “The people who should run the world cut hair and drive cabs.” Could they have made a bigger mess? As small business people they saw it coming two years ago. But economists, politicians, even bankers did not listen.
PAT EDLIN
Address supplied


Send your letters to: The Letters Editor, Islington Tribune, 40 Camden Road, London, NW1 9DR or email to letters@islingtontribune.co.uk. Deadline for letters is midday Wednesday. The editor regrets that anonymous letters cannot be published, although names and addresses can be withheld . Please include a full name, postal address and telephone number. Letters may be edited for reasons of space.

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