Commentaries

Now raising intellectual capital

Bankslaughter

There are criminal investigations into the events of the recent financial crisis. The two managers of the Bear Stearns hedge funds that blew up in the summer of 2007 have been indicted in Brooklyn, and more cases in other venues and more charges against executives will certainly be brought.

Yet there is still a palpable public frustration that the wheels of justice are moving too slowly or that it will be too difficult to prove fraud when really recklesness or incompetence were to blame. Several commentators in Britain have suggested that a lower standard of criminal culpability be established when banks die. There is a name for this crime: bankslaughter.

Paul Collier in the Guardian writes:

With bankslaughter, when the bank blows up – even if it is a decade later – a criminal investigation traces back to determine whether crucial decisions were reckless. If a reasonable banker faced with the information available at the time would not have taken those risks, the person responsible is dragged off the golf course and jailed.

Once bankslaughter was on the books, bonuses would be less dangerous. Managers would have to weigh the balance between risk and return and take defensible decisions. I doubt hyper-caution would be a problem: the overly cautious would not get bonuses. Surely we can rely on our bankers to exhibit the necessary degree of greed.

Tough questions after Madoff

Even as Ponzi king Bernard Madoff goes away to prison for the rest of his life and then some, there are still so many unanswered questions — both big and fundamental.

Were Madoff’s sons involved? What did his wife Ruth know? Were the operators of the giant feeder funds that sucked in tens of billions of dollars in investor money in on the charade?

Events, dear boy, events

Several blogs have pointed to a pair of fascinating timelines on the U.S. financial turmoil and on the international response to the crisis that were produced by the Federal Reserve Bank of New York.

In the case of the U.S. timeline, what’s also interesting is what has been left out. The timeline, not surprisingly, emphasizes actions by the Federal Reserve and the federal government and does not itemize every major event involving a financial firm. The mortgage-related write-downs, for example, are summed up with an Oct. 16, 2008 item: “Citigroup begins a string of major bank writedowns.”

from FaithWorld:

Sarkozy dons burqa to camouflage reform agenda

sarkozy-speechIn a column last week, I noted how Nicolas Sarkozy was a master at signalling left while turning right. Well, in his keynote address to both houses of parliament today, the conservative president went a step further. He summoned up the burqa to camouflage his real intention -- relaunching a drive to reform France's ossified social, education and tax system. (Photo: President Sarkozy delivers his speech, 22 June 2009/Pool)

By declaring war on the all-enveloping full-length veil worn by only a tiny minority of Muslim women in France, Sarkozy ensured that his secularist assault on religious fundamentalism would grab the headlines, and dominate intellectual debate. Here's what he said:

Regulation as will and idea

It is somewhat strange that a disgraced elected official has now repositioned himself as an expert commentator on financial regulation, but that is exactly what Eliot Spitzer, the former New York governor, has done.  His most compelling article for Slate to date is a critical look at the Obama administration’s proposed financial overhaul.

Regulators failed in the financial crisis not because they lacked the proper tools, Spitzer says,  but because they lacked the “will to use existing power.” 

Mervyn King’s uncomfortable sermon for the City

Did Mervyn King miss his true vocation? Last night he compared the Bank of England to a church – with the Governor as the priest – as he took to the Mansion House pulpit to pour a rhetorical bucket of cold water over guests at the Lord Mayor’s banquet.

Headline writers predictably seized on King’s disagreement with Alistair Darling over Britain’s regulatory structure. But the more interesting section of his speech dealt with banks that pose a threat to the stability of the financial system.

Talk about an understatement

Is this what we’re calling reckless risk-taking these days? Dealbook reports that Goldman Sachs chief Blankfein apologizes to U.S. legislators for participating in the “market euphoria” that led to the financial crisis.

  •