Financial Crisis 2008 – Who to Blame?
Bank is the most trusted financial institution. Their stability is the firm foundation of our peace and trust. The funny thing about how a bank works is that it functions because of our trust.
The consequences of banking system collapsing have been still seen until today. Every bank motto is help their customers, provide great service and assist in financial needs by lending us money, but so often we see banks succumb to irrational exuberance and lend too much to find that their reserves are empty and declare bankrupt. Northern Rock is the best example to showcase this scenario, and is now happening to many big banks. The banking system was saved from collapse by billions of pounds of taxpayer’s money which has left a deep scar and anger. People wanted to see bank bosses to be responsible and take control to ensure this could not happen again, a popular phrase “Fred the shred” which speaks out the rage at its best.
Every big bank has appeared on the front page of every newspaper more days than ever, a year of global financial earthquake which bought down giants like Lehman Brothers. I still remember the photo of Lehman Brothers employee in media walking out of his building in Canary wharf, London.
There were many other big banks which all came within a whisker of doing so and had to be rescued naming a few were Merrill Lynch, Royal Bank of Scotland, HBOS, Alliance & Leicester. This was the worst financial crisis also known as global financial crisis and considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s.
Who do we blame?
When something goes wrong, immediately we point fingers at others to blame. Now imagine when something complicated goes horribly wrong that creates financial crisis in the world?
Who is to blame?
Greedy investment bankers who used complicated derivatives which no one could understand and they made a fortune at the expense of tax payer’s money? Or the bank bosses because of their incompetent decisions declared themselves bankrupt?
While the collapse of large financial institutions was prevented by the bailout of banks by national government, stock markets still dropped worldwide. Housing market also suffered resulting in evictions and unemployment was higher than ever before. Financial crisis also resulted in many businesses closing. Several commentators have suggested that if the liquidity crisis continues, an extended recession or worse could occur.
A Decade since 2008 crisis:-
A decade after the banking crisis, nothing has changed much, but British Banks are smaller and poorer a few examples I have taken from Bloomberg:-
• Northern Rock asked for emergency support on Sept. 14, 2007
• Barclays, RBS have together slashed $4 trillion of assets
A decade ago, a list of the world’s largest financial institutions was dominated by banks from the US and UK. Today, just a handful of the top 20 have their headquarters in the US, still the world’s largest economy. HSBC, at heart an emerging markets bank, is Britain’s sole representative.
A decade on are we able to put our trust back into the banking system?
Please share your thoughts. Let me know if I should be including facts and figures in my blog going forward? Or any other tips