Amid the turmoil of the 2008 financial crisis a myriad of events unfolded that the general public knew nothing about, writes New York Times reporter Andrew Ross Sorkin in a new book titled “Too Big to Fail.”

Wall Street fell from the dizzying heights of good fortune to calamity in a matter of months. To a large degree it’s still to early to tell whether financiers and politicians involved made the right choices.

“At its core ‘Too Big to Fail’ is a chronicle of failure — a failure that brought the world to its knees and raised questions about the very nature of capitalism,” writes Sorkin in his behind-the-scenes account.

He spoke with Reuters before giving a lecture at the London School of Economics on Thursday.

British economist and author John Kay argues in “Narrow Banking: the reform of banking legislation” that the financial services industry should be restructured to ensure that regulation serves the interests of the public.

“A competitive marketplace is one in which well run businesses earn profits through domestic and international competition, and badly run businesses go to the wall,” he says.

“That is the process by which the market system promotes innovation and economic progress, and suppression of that process damages innovation and economic progress.”

(James Saft is a Reuters columnist. The opinions expressed are his own)

There are encouraging signs that shareholders are becoming more assertive in defending their interests.

The Financial Times reported on Monday that some of Britain's largest institutional shareholders - including Standard Life, Legal & General and M&G - are working on a plan to bypass investment banks by creating a club to underwrite new issues of equity by small and medium-sized British companies, a move that could save hugely on fees.

What, you may wonder, took them so long?

Second only to taxpayers, investors have been the great patsies of the financial crisis, paying massive costs to a financial services industry which has, to put it mildly, not served them well.

Activist shareholders and investors could be a key force in fixing what is wrong with the financial system. Unleashing their power to act in their own best interests should be a main thrust of new regulation.

The British investor group, reportedly being assisted by mergers and acquisition advisors Lazards, would effectively cut out the middle men by agreeing to take up any unwanted new shares in an offering. This is an idea which if successful could save companies and their owners huge amounts in fees and at the same time deal a blow to investment banking profitability.

Fees charged by banks for equity underwriting in Britain have more or less doubled in the aftermath of the crisis to 3.5-4.0 percent of the amount being raised, with the lions share going to banks rather than to the institutional investors who sub-underwrite.

While banks may argue, and in part be correct, that this is because the past two years have demonstrated the risks of capital market underwriting, it is also patently because there are now fewer banks competing for this business.

To be sure, a club approach is better suited for small and medium sized underwritings and would face huge difficulties for a major share issue involving global investors. But if a test run proves successful it would place pressure on fees for transactions of all sizes.

Even before the crisis hit, fees for investment banking services seemed not to follow with the same fidelity the laws of economics which hold such sway in microchips, steel or even tax preparation.

And it's not just investors, who consume investment banking products, who have been ill-served. Shareholders in companies, particularly in banks, have provided the capital but have not had their fair share of the fruits.

FOR WHOSE BENEFIT IS THIS ZOO BEING RUN?

That has led to bad decisions, decisions often designed to maximize the benefit to employees at the expense of the shareholders who run disproportionate risk.

Paul Myners, a British Treasury official with special responsibility for financial services, gave an absolutely scathing address last week to the Worshipful Company of International Bankers, assembled for dinner in the Mansion House in the City of London.

Myners, who is reported to be considering holding a competition inquiry into banking fees, took aim at the bonus and compensation culture in the industry.

"It could be argued that some shareholders in banks have been left holding not the ordinary shares they originally purchased, but a new form of subordinated, participating, non-cumulative equity that ranks behind rewards for the senior management, and executives of the firm in which they invested have a prior claim. This cannot be right," Myners said.

"In case anyone needs reminding, the profits of banks belong to their owners; not their managers and traders."

I imagine that the bankers were a little less worshipful on their way out then they were on the way in.

I would also argue that what Myners said about banking also holds true - to a lesser extent - in other publicly traded companies, where management is able to extract compensation out of proportion to their likely contribution.

Shareholders, and we are really talking about institutional shareholders, have allowed management to get away with it for years because they thought what they were supposed to be doing was outperforming the market by picking winners.

Much of what passed for skilled investment over the last 20 years has been little more than riding the waves of a debt-fueled economy which seemed capable of providing six to ten percent returns on an unleveraged basis.

Adding value too often meant little more than adding leverage to increase returns. When the current rally ends, as it surely will, investors should take a long look at their long term returns. What they will usually see is that they are poor.

A better strategy for the next 10 years may be to spend as much effort protecting your economic interest in what you own as you do in choosing what to own.

(At the time of publication James Saft did not own any direct investments in securities mentioned in this article. He may be an owner indirectly as an investor in a fund. )

- Glenda Stone is chief executive and founder of Aurora, a recruitment advertising and market intelligence company, and co-chairs the UK Women’s Enterprise Taskforce established by Prime Minister Gordon Brown. The opinions expressed are her own.-

A theory once proposed by Estée Lauder Companies chairman, Leonard Lauder, was that in times of economic downfall women purchase more lipstick.

Referred to globally as the “Lipstick Index”, the theory asserts that in times of economic distress women substitute expensive fashion items for less expensive grooming and “feel good” items such as lipstick.

Estée Lauder observed this phenomenon following the Sept. 11, attacks in 2001. It has also been touted by such iconic beauty houses as Yves Saint Laurent and Chanel. Even Bobby Brown launched their 10 shades of lipstick range in 1991 right in the middle of a big recession.

So lipstick may be the female morale booster as were the comic Charlie Chaplin films released during the Great Depression of the 1930s, but will it be enough to pull women out of the doldrums when there simply are just not enough jobs to go around?

Reviewing women’s participation in paid employment over the decades, Office for National Statistics findings show that in 1971 the UK employment rate for women was 56 percent compared with 70 percent by the end of 2008.

This compares with a similar decrease in men’s employment rate for the same period, with UK male employment falling from 92 percent to 78 percent. In 2008, more than 12.5 million working age women in the UK were in paid formal employment, with 40 percent working part-time compared to around 11 per cent of working men. The all-time record high for UK employment was in Q3 2007 at 29.1 million.

But what has been happening for professional women throughout the economic downfall and are more women than men being made redundant - and if so why?

Numerous research studies have been published and they differ greatly on their findings. The ONS, in Q1 2009, stated that estimates suggested fewer women than men were being made redundant with the redundancy rate for women in the three months to December 2008 being 6.6 per 1,000 employees, less than half that for men which was 13.6 per 1,000 employees. Yet the UK’s Trades Union Congress (TUC) stated that since the start of 2008 the female redundancy rate increased by 2.3 percentage points almost double the rate of male increase at 1.2 percentage points.

In some parts of the UK such as in the North West region, data shows that the rate of women’s unemployment has increased at almost double the rate of male unemployment since the start of the downturn.

Some areas and reasons why women are being specifically affected by the recession is that women are more likely to work in part-time roles which are significantly reduced during a downturn. Also, if government spending cuts prevail then more women will find their jobs at risk as there are more women than men employed in the public sector.

A further impact is that women are more likely than men to be in lower paid work, and so are less likely to have savings and as such face greater risk of more immediate poverty through unemployment. With the added complexity of childcare responsibilities, women may also find it harder to re-enter the workforce. Some research studies have also cited more pregnant women than childless women being targeted for redundancy.

And then there is always that territorial Darwinism factor - survival of the fittest. Will women compete as actively as men for fewer positions?

The Women’s Enterprise Task Force I co-Chair produced a research report into “Women in the recession” and found, amongst other things, that women’s enterprise is well sustained in a down market due to the low-risk, cost-contained models predominantly used by female business. It will be interesting to see whether women leaving corporate sector through redundancy do actually decide to “go it alone’ and set up shop for themselves … but hopefully not selling lipstick!

Problems sparked by the financial crisis have not gone away, but have been transferred to the public sector, economist Roger Bootle posits in his new book.

In "The Trouble With Markets: Saving Capitalism from Itself" Bootle argues that in large measure, the underlying cause of the financial crisis was the result of an idea that markets work, and that governments do not.

"Despite the trillions of dollars lost, and despite the worries of millions of people, more than this -- much, much more -- is at stake," Bootle writes. "For this crisis has delivered the killer blow to an idea that has underpinned the structure of society, framed the political debate, and moulded international relations for decades."

Bootle, director of Capital Economics and an economic advisor to business accountancy firm Deloitte, reflects on the pitfalls of the corporate system and puts forth his ideas on the future of capitalism.

He discussed his book and his economic predictions with Reuters at his London office.

-John Monks is general secretary at the European Trade Union Confederation. The opinions expressed are his own.-

One year on from the collapse of Lehman Brothers, we can see that that wreckage was the first of many.

The crisis in financial markets has spread like wildfire into the rest of the economy, despite often skillful effort by many Governments and central banks to keep afloat the banking and credit supply systems.

The sheer scale of recklessness in the banks and the vast rescue plans needed to bail them out is impoverishing western societies – to different extents, it is true, but no-one is untouched by the firestorm.  Unemployment is rising quickly and will reach 11percent in the EU over this winter.

Meanwhile some incorrigible optimists can see the green shots of recovery.  In fact they are mistaken.  What they are seeing are things getting worse less quickly.  Yet this optimistic school is not naive.  There is method in their apparent optimism.

They want “business as usual” to return as quickly as possible.  If the recession is a steep dip but with a quick recovery (v-shaped) then there is no need for systemic change as far as financial institutions are concerned.  And if the recession is over, public debt can be repaid by savage cuts in public expenditure.

I hope the recession is v-shaped although I have to note the recent opinion of the International Monetary Fund that recessions caused by banking failures normally least around seven years.  But, in any event, the cost of the rescues to date is imposing debts of trillions on governments which will take decades to repay fully.

So root and branch reform is necessary and I hope that the G20 in Pittsburgh this week agree on key measures on bonuses, reserves, tax havens and so on, so that never again can banks behave like badly run casinos.

I hope too that governments do not take early action to cut public spending.  As Lord Skidelsky magisterially pointed out in Saturday’s Financial Times, the Conservatives apparent urgent desire to balance the books as quickly as possible is economically illiterate and profoundly dangerous.  The economic outlook is far too fragile for that.  It would as if after El Alamein in 1942, Churchill had said “now we must think about repaying the US loans”.

The Liberal Democrats disappointingly have joined in on ‘who can cut the most’, whereas my line is a modest expansion of public spending on youth unemployment in particular.  We can plan the pay back phase in due course and we must not become obsessed with “who cuts, wins”.

No longer just a hopeless cause for anti-capitalist activists, the idea of a global tax on financial transactions is gaining ground in Europe.

European Union leaders could not agree to put it on the agenda of this week's G20 summit on reforming the financial system in Pittsburgh, but the leaders of France, Germany and the European Commission endorsed the concept.

More strikingly, the head of Britain's Financial Services Authority, which regulates the world's second biggest banking centre, said last month that such a levy could help shrink a swollen financial sector.

"...If increased capital requirements are insufficient I am happy to consider taxes on financial transactions -- Tobin taxes," FSA chairman Adair Turner told Prospect magazine.

Nobel prize-winning U.S. economist James Tobin first proposed a small levy on currency trading in 1972 to penalise short-term speculation after the United States abandoned the gold standard and floated the dollar.

His idea found no takers then and lay dormant until the French-based anti-globalisation movement ATTAC (the Association for the Taxation of Financial Transactions for the Aid of Citizens) began campaigning for it in the mid-1990s.

In the meantime, the scope of the proposed tax, the policy objective and the proposed beneficiaries had changed.

French Foreign Minister Bernard Kouchner says he and British Foreign Secretary David Miliband have agreed to work on a proposal for an "international financial contribution" to fund development assistance. He estimated a voluntary contribution of just 0.005 percent on financial transactions
would raise 30 billion euros ($44.10 billion) a year.

Many key details remain to be worked out, such as who would receive and allocate the revenue and for what projects.  A plan will be put to a meeting of 58 nations in Paris next month to discuss innovative financing to meet the United Nations Millennium Development Goals. These involve eradicating
extreme poverty, hunger and disease, promoting gender equality,  health, education and clean water, and reducing child mortality.

Germany's Social Democrats, junior partners in Chancellor Angela Merkel's Grand Coalition which faces a general election next Sunday, say the proceeds of a Tobin tax should go to meet the costs of bailing out banks in the global financial crisis.

Don't hold your breath. Agreement on such a tax is anything but imminent. Merkel, a political conservative, said it would only be feasible if all the world's main financial centres agreed to levy it, and there is no sign that the United States is remotely interested.

Her support sounded like lip service, echoing widespread indignation among German voters at U.S. and British financial capitalism, which their leaders have blamed for the crisis.

Critics of the Tobin tax, including the banking and business lobbies, argue that a levy on financial transactions would drive business offshore, reduce trading volumes and liquidity, hit employment in the financial sector, harm shareholders and slow the world economy. They also say it would be hard to collect and easy to evade.

A lot of this is specious special pleading. Of course banks don't want to be taxed on lucrative high frequency trading. But  there is no inherent reason why there should be a tax on buying a car but not on buying a derivatives contract. No one seriously argues that you can't tax cars for fear of killing
jobs or driving the auto industry to Singapore or the Cayman Islands.

Moreover, it is hard to see why a fractional tax rate of 5 cents on every $1,000 would seriously impair liquidity. Britain has long charged stamp duty on share and real estate transactions, while the United States funds its regulators through a tiny levy on transactions.

The FSA's Turner argues that diminishing the turnover of the financial sector would be a worthwhile objective in itself to reduce the amount of "socially useless activity".

Perhaps the most salient criticism is that a Tobin tax would do little or nothing to deter risky financial engineering and excessive leverage. That is not its purpose.

With Western governments facing huge budget deficits and debt mountains due to the crisis, the funds available to help the poorest countries are bound to shrink unless new revenue sources are tapped. Taxing financial speculation is surely more appealing than raising taxes on income or labour.

- Geoffrey Wood is professor of economics at Cass Business School in London. The opinions expressed are his own -

The collapse of Lehman Brothers on September 15, 2008, was the largest bankruptcy in U.S. history, sparking a crisis that paralysed the global financial system. But how significant was the bank’s collapse to the UK economy? What about other events such as Northern Rock? Professor Wood argues that the fall of Lehman was just one of many symptoms of the recession in this country.

The year of global change: watch our documentary and view our interactive timeline on the fall of Lehman Brothers and the 365 days of upheaval that followed.

One of the week's more amusing stories takes us to the sun-kissed shores of the Cayman Islands, scuba diver's paradise, magnet for hedge funds and - until very recently - world-beating tax haven.

The financial crisis has not been kind to the Caymans. Hundreds of hedge funds have collapsed and global banks have slashed jobs. As if this was not enough, President Barack Obama in the spring launched a crackdown on tax havens that forced a number of Caribbean islands, including the Caymans, to embrace greater transparency - after a fashion.

Things are so bad that the government of the Cayman Islands is facing a $82m revenue shortfall in the budget. Local officials say they need a big loan or the government risks bankruptcy.

However, the British government - which oversees the islands - last week vetoed the loan. Chris Bryant, the British Foreign Office Minister, said he would not approve any new lending until he was convinced the Caymans had their house in order. He even suggested the islands might have to introduce - horror of horrors - income taxes in order to make ends meet.

Bryant continued:

It would be unwise, I suspect, to rely too heavily on a rapid improvement in trust fund income or to expect that the Cayman Islands' prosperity can presume on an off-shore tax haven status.

Bryant would appear to have a point. But the island's financial authorities think the British have other, baser, motives. As Anthony Travers, head of the Cayman's financial services authority CIFSA, told Reuters' Lorraine Turner:

We believe there is another agenda, which seems to have more to do with the competition for financial services and concern that unreasonable tax rates in G20 countries will cause an exodus of people and financial services companies

Well, he would know.

Historic is usually a word that makes my skin crawl when I see it in the news. Journalists are prone to overuse it, so when I saw it in our election stories I had to stop myself deleting it -- because this election truly is historic.

The Liberal Democratic Party had never lost an election since its founding in 1955. Even when it lost power for a few months in 1993/94, it was because of LDP lawmakers defecting rather than an election loss.

So the Democratic Party, under prime minister-elect Yukio Hatoyama, has a huge mandate. What will he do with it?

It's clear that the last two elections were votes for a change to the old system where the ruling LDP, big business and bureaucrats ruled the place. Remember the 2005 LDP landslide was led by Junichiro Koizumi running on the destruction of his own party's pork-barrel history.

The question is whether voters also rejected deregulation in the wake of the financial crisis and slumping exports that put large numbers of unprotected contract workers out of work.

The Yomiuri newspaper, Japan's biggest seller, certainly subscribed to that view in its editorial on Monday. Along with the undisputed argument that voters were disgusted with the LDP's failures, it said the defeat "was brought about by the collapse of its structural reforms that went too far".

Hatoyama certainly campaigned on that basis, raising eyebrows as he attacked "unrestrained market fundamentalism" in a magazine article that was subsequently translated and published in the New York Times.

Attacking markets is not unusual after the financial crisis, particularly in Europe, but Japan is hardly a carbon copy of U.S. free-wheeling capitalism. So it was interesting to see Hatoyama backpedalling a bit even as the votes were being counted and the reality of government set in.

"We are not saying that the market principles are all bad," Japan's new leader said. "But the current economic situation is one where there need to be corrections in areas where reform went too far."

So the Democrats have cleverly left themselves a lot of room to move Japan in whatever direction they want -- from strengthening a threadbare social safety net to ending Japan's heavy reliance on exports.

Whatever they do, they must be more savvy in their marketing than their predecessors.

For the LDP, the disgust of voters was so ingrained that even a giveaway of around $130 cash to each voter as part of economic stimulus efforts earned ridicule rather than gratitude.

Photo credit: REUTERS/Kim Kyung-Hoon