Financial Crisis, Five Years Later

Big banks are awash in record profits   almost five years after the collapse of Lehmann brothers in the September of 2008.  Lehmann’s bankruptcy set of a  chain of events that led to a credit crisis and a meltdown of the financial markets, which in turn led to the worst recession since the Great Depression. I want to use the upcoming five year anniversary of Lehmann’s bankruptcy to revisit the crisis and it aftermath,  I plan to focus on these points in particular;

  • Banking sector and its role in the capital markets
  • Regulatory Regime
  • The perspectives of theoretical finance and macroeconomics
  • Overview of the academic literature
  • Overview of the mainstream press (Wall Street Journal, Forbes,  Business Section of New York Times, popular books etc.)
  • Focus on what is still missing from the above analysis and questions that still remain unanswered
  • Suggestions to avoid a similar catastrophe

This is a tentative outline and the list may undergo changes depending on the results of my explorations. If you think there is any aspect that is not in my list but would be interesting to look at, please leave it in the comments.

Posted on July 19, 2013, in Economy and tagged . Bookmark the permalink. 4 Comments.

  1. Very interesting topics – however, as someone who has worked for large MNC and also seen closely the workings of international banks, i think the answer lies in social organizational studies rather then economics. The truth is 1) Organizational and shareholding structures encouraged people who would inflate earnings and bonuses in short term basis so that individuals could profit at the expense of organizations 2) These individuals sidelined honest and brilliant people in the organization with a set of sycophants who were ‘yes men’ to the boss 3) Most knew and took risks willfully, knowing this would be suicidal for their organization in the long run, but would make them immense wealth in the short run.
    Only answer to my mind is more shareholder activism, independent rating agencies, more shareholder participation in management of the company and much more reduced bonuses and salaries! – hope this is food for thought!

    • Thanks for the thoughtful comment. However, I think the problem is more systemic than just some few bad apples.

      • I don’t think it’s a case of few bad apples- they are in all organizations around the world- the problem seems to be that lack of shareholder activism and the manner of rewarding actions almost ensures that these bad apples raise to the top- all these organisations are monolithic- power is centralised with the CEO and he brings in more bad apples..

  1. Pingback: Fifth Anniversary of the Financial Crisis | Schroedinger's Cat

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