Financial Crises as Groundhog Day

The endless cycle of financial crises owes much to the flawed relationship between the elected politicians of the government of the day, the politicos appointed to run these agencies and the well known absence of a learning mechanism in the institutions of democratic government. It baffles me that there continues to be surprise expressed, akin to moving from the sublime to the ridiculous, merely at discovering such conflicts exist. Each time the chronic ineptitude of the institutional response and its inevitable failure, does little more than provide further evidence of the existence of fundamental flaws in the system. I mean I was studying this at uni in the mid 90s and then after the briefest spell working at a bank, it was quite apparent what was going on that any fool could see it. This refusal by lawmakers and regulators to have a look around when even my cursory effort told me all I needed to know on this score and about much else makes me fear for the future and the inevitability of corporate scandal and financial collapse yet to come with economic consequences and repercussions around the world.

After a period that could be defined by the regularity of the recurrence of financial crises, it beggars belief that the political response remains the same in terms of knee-jerk legislation, the institutional witch hunt for high-profile and soft-target wrongdoers and any kind of root and branch approach that is the best hope to preventing events repeating themselves remains a pipe dream. In the last couple of decades, from the outset there has been a failure to identify leading indicators to areas of systemic concern such as institutionalising a cultural mindset of unethical behaviour in the corporate world through such a core function as the accountancy profession. Each time the consequences of the failure to grasp this nettle have shown their cataclysmic potential, we’ve seen the same bewildered and befuddled response from all involved, be it Enron and WorldCom for auditors and accountancy firms, the dot com crash and IB research analysts and now and ongoing with subprime and the ratings agencies. There is a clear failure to adequately police the system and in the course of action pursued by the authorities in response to events, most recently in the case of MF Global, which is basically just a sad indictment of where true blame lies for the failure to prevent the endless cycle of fiasco since their response and reform usually only pays lip service to anything other than their own political agenda.