Greed catches up with global bankers

By The Natino
Published on September 19, 2008

Only four or five months ago, several leading international bankers were still assuring others that the US financial crisis would settle by year's end. But with Lehman Brothers' collapse and American International Group's US$85-billion (Bt2.9 trillion) emergency loan from the US government, many now believe that the crisis is far from over. The global market yesterday reached a level of panic that many market watchers said has not been seen since World War Two. Investors are dumping short equities and dollar-dominated assets for save havens like gold, oils, bonds and cash. As Asian markets flopped, gold and oil jumped. The US's short-term treasury bond yield fell to a record low.

The financial model of many investment bank giants has been questionable. Lehman Brothers and others have made major investments without the capital needed to deal with crisis. Many are now looking for a more sustainable model for the banking industry.

The US Securities and Exchange Commission, responding to the market rout this week, may require hedge funds to disclose their short-sale positions and plans to subpoena them for their communication records.

This might be the first step towards sustainable financial development in a developed economy like the US. But what needs to be considered above all is how to ensure that financial products offered by investment banks are transparent, with no hidden not-so-clean assets. Besides, shareholders and investors should learn to seek out sustainable returns as well.

As former US Federal Reserve chairman Alan Greenspan has pointed out, one of the major causes of the current financial turmoil is the greed of investors, thus the solution must come by getting back to basics, putting greed in check, and taking a prudent approach forward.

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Greed catches up with global bankers

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