ENRON: the collapse
Nobody has said 'sorry' so far
By Tracy Corrigan
To err is human, and so is the desire to rub other people's noses in their mistakes. But there is one thing that brings us up short in our wish to find fault, and that is remorse. More than a year into the financial meltdown, there has been very little sign of that from anyone.
Alan Greenspan, the former US Federal Reserve chairman, who helped create the conditions for the crisis by keeping interest rates too low for too long, seems entirely unabashed. I have heard Sir Martin Jacomb, a former chairman of Barclays, call for bankers to show more contrition, but I haven't caught any of them doing so. Nor have I noticed any regulators admitting that their oversight was inadequate, or accountants apologising for letting through shaky numbers.
In America, where the desire to atone seems no more pronounced than anywhere else, the matter is frequently taken out of executives' hands. What do the former bosses of corporate giants Tyco, WorldCom and Enron have in common? Answer: Dennis Kozlowski of Tyco, Bernie Ebbers of WorldCom and Jeff Skilling of Enron are all doing time, admittedly for company-specific fraud.
Privatised gains, socialised losses.
I'm not suggesting that we string up all the bankers connected to the credit crisis. In a global financial crisis that catches almost all businesses in its wake, it is much harder to distinguish the victims from the perpetrators, and the well-intentioned, who may have made honest mistakes, from the negligent. But that doesn't mean it isn't worth trying.
The Federal Bureau of Investigation is currently examining the conduct of 26 businesses affected by the credit crisis, including Lehman Brothers, AIG (American International Group) and mortgage giants Fannie Mae and Freddie Mac. Last week, the former chairman and chief executive of the bankrupt Lehman, Dick Fuld, was subjected to a grilling by a House of Representatives committee. In his testimony, he blamed a systemic lack of confidence, short-sellers and regulators, but he didn't blame himself - not even for his failure to make more of an effort to find a buyer for Lehman while he still could. But at least he had to sit there being publicly castigated.
From the vigorous debates on the Treasury Secretary's bail-out plan to the regular grillings of bankers and executives by politicians, America's open democratic system appears to be fully functional, even if its banking system isn't.
Within the next few years, I would imagine that more than one American executive will be behind bars as a result of his role in the credit crisis. I very much doubt that will be the case in Britain. The Government has - rightly - won accolades for its smart response (latterly) to the crisis. But there has yet to be a full debate in Parliament on the nationalisation of the banking sector, and the Treasury Select Committee does not appear to have any plans to call executives from the British banks receiving taxpayers' money.
If their answers are anything like as unconvincing as those of Fuld - who responded to the charge that executives had privatised gains and socialised losses by noting that Lehman Brothers had tried to align shareholders' and employees' interests - at least we would have the satisfaction of seeing them wriggle in their seats.
I'm also losing patience with countless attempts to create some sort of moral equivalence between bank bosses who were paid a lot of money to run their institutions professionally, and consumers who suddenly found themselves with more debt than they could handle.
It is one thing to chastise style-obsessed shopaholics who run up massive credit card bills by living beyond their means. But pouring scorn on people who, struggling to climb on the housing ladder, jumped at the offer of 100 per cent mortgages peddled by the banks, seems grossly unfair. Gearing up to buy a thin-walled, two-bedroom flat a stone's throw from the North Circular looks more like desperation than greed to me.
In America, there is evidence to suggest mortgage brokers were encouraged to push products at sub-prime borrowers in order to feed the securitisation machine, earning big fees for investment banks. Did that happen here? We need to start getting answers. But we aren't even asking the questions.
- The Telegraph Group Limited, London 2008
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