I can’t quite believe that the bankruptcy of Lehman Brothers occurred a year ago. On Monday 15 September 2008, I started a report with the sentence: “The financial landscape has changed over a tumultuous weekend.” On reflection, that sentence was both an understatement and incomplete.
It was an understatement as it failed to capture the effects of the then-incipient panic rippling through financial markets and into the real economy. The consequences for jobs and growth were much worse that almost anyone anticipated.
But, although the financial landscape was quickly reshaped by the events of a year ago, the long-term changes have still to be worked out.
Many of those long-term changes will come in the form of new rules for financial institutions. On Monday, President Barack Obama spoke in New York of the need to establish the “ground rules and level playing field that helps to make those markets more vibrant.”
Work is moving ahead on establishing those rules. As important contributions to the debate, I’d highlight the work of the Group of 30, the De Larosière report (pdf) and the Turner Review. And now organisations like the Financial Stability Board and governments in the UK and US are now publishing specific proposals.
The work on reforming financial regulation is, by its nature, technical. Few get excited over the rules for tier 1 capital or the details of the resolution regime for systemically important institutions. But the rules are important – and we have seen over the last year the disaster than can ensue when they do not work. As President Obama said on Monday:
"One year ago, we saw in stark relief how markets can err; how a lack of common-sense rules can lead to excess and abuse; how close we can come to the brink. One year later, it is incumbent on us to put in place those reforms that will prevent this kind of crisis from ever happening again; that reflect the painful but important lessons we've learned; and that will help us move from a period of recklessness and crisis to one of responsibility and prosperity. That is what we must do. And I'm confident that is what we will do."
Posted at 17:36 16 September 2009 by Tom Barry | Comments[0]
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