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Arsonists as the Fire Brigade

Supported by ideologically-blinded deregulators, the "masters of the universe" dominant in Wall Street and the City of London could bend the rules of the game on the global financial markets. Their shadow banking system existed above politics and regulators.

By Wolfgang Lieb

[This article published on www.nachdenkseiten.de, March 5, 2009 is translated from the German on the World Wide Web,  http://www.nachdenkseiten.de/wp-print.php?p=3807.]

Never was a world financial crisis driven with such debt, cooperation of overseers and regulators. No wonder that trust in inspectors and central banks has fallen to an all-time low according to polls in many countries - right behind bank managers. Many prominent guards and central bankers helped tear down many regulatory barriers - entirely in the interest of the financial industry without regard for "financial stability." After leaving their offices, they are even rewarded for their influence and insider knowledge with millions as honorary advisors. As advisors of the top management of investment banks and big worldwide banks, they become accomplices of a business policy that led to the collapse of the banking system and today's worldwide economic crisis. Billions of people feel this in the deterioration of their living conditions. Overseers and central bankers must have known the risks for their institutions and for the whole financial system would become ever greater in their striving for higher short-term profits and bonuses.

In most countries, the responsible elites that drove the carriages into the morass are the same ones who sit in the coach boxes again today and drag the carriages into the mud...

The historically grounded "special relationship" of Americans and Brits played a great role as a cause for the catastrophe on the financial markets that has expanded to the most serious worldwide economic crisis of recent times. That the British premier Gordon Brown as minister of the Exchequer always gave flank protection to the Bush administration may not be greatly changed in the future. Ultimately the global competitiveness of Wall Street and the hegemony of the City of London had to be defended against overly strong regulations.

Supported by ideological-blinded deregulators like the head of the US Federal Reserve Alan Greenspan or the Bushians who governed for eight years and their British friends like Gordon Brown, the "masters of the universe" dominant in Wall Street and the City of London could bend the rules of the game on the global financial markets. To earn as much as possible as quickly as possible in the worldwide securities businesses, Wall Street and the City of London had to build a gigantic shadow banking system not impeded by overseers and regulators. Like the so-called offshore financial centers, this shadow banking system existed above politics, regulators and multinational financial institutions like the International Monetary Fund (IMF), the Bank for International Settlements (BIZ) and the Financial Stability Forum (FSF) established in 1999.

Klaus C. Engelen, free researcher of Handelsblatt in "Barely Contained Outrage. What Europeans really think about America's regulatory blunders" in the last issue of International Economy analyzes how politics, overseers and central bankers, the financial industry in Germany was put in the chains of "regulatory capture" and how governments, overseers and central bankers on the European continent failed strikingly.


"Barely Contained Outrage. What the Europeans really think about America's regulatory blunders," by Klaus C. Engelen (102 kb)



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