There is a perfect storm in financial world markets… 6% off by noon London time – equivalent of the Dow losing 700-800 points. This could be a Black Monday in New York with the bankruptcy of Lehman and worldwide, bank stocks have fallen 20% or more. And perhaps, finally, transparency and sensible regulation will follow wiping smug “greed is good” grins off of the faces of 9-figure earning fund managers and bankers.
In March of 1997, then Federal Reserve Chairman Alan Greenspan warned of “unbridled optimism and irrational exuberance.” Markets fell precipitously but behaviours became more sinister. Used to the high life, fund managers wanted to keep the party going with dodgy instruments such as repackaging horrifically bad home mortgage loans as securities while the Bush Administration turned a blind eye.
While the last and next nine-hours have been/will be difficult for markets around the world, it could be the best thing to happen to them. Wall Street, The City and Hong Kong fund managers and bankers have thumbed their noses at the rest of us in the non-financial world for decades and thought they had the best of all worlds. They could make money however they wished and were safe in the knowledge government(s) would always bail them out. The managers would then retire in mock shame to their off-shore islands with their millions already safely invested and leaving someone else to hold the bag.
With Lehman bankrupt and on its own the government drew a line in the sand while the ticking bomb of AIG Insurance Group (they are on the hook for a lot of banking and Ike losses) heads to zero. Barclays and BofA, to their credit said no, despite the wish of the government to see a shotgun wedding without a Bear Stearns like bailout/guarantee.
It will be rough for a year or more. And then, perhaps stability and sensibility will be the rule of the day. The party is over, now the rest of us have to pay the bill and clean up. The only true justice will be the frog-marching of those responsible to jail and seizure of their ill-gotten gains (assets).
So brush off those extradition treaties and make some room in The Hague for a new brand of global criminal.
