THE WEEK THAT WAS... (September 16, 2013)

Last week we ‘celebrated’ the 5th anniversary of the collapse of Wall Street investment bank Lehman Brothers. The financial crises provoked by Lehman’s fall prompted the Eurocrisis and devastated European economies. Unemployment in the EU is still on a record level of 26 million, nearly 11 percent of the labour force. Youth unemployment is even higher. As average people still feel the pinch of austerity, multi-billion bailouts have been gone to the banks that caused the crisis.

After the Lehman disaster 5 years ago, European leaders, including Commission President Barroso, didn’t hesitate to promise firmly to reform the banking regulations in the EU to avoid that such a disaster could ever happen again. Broken promises! European banks are still lending far above safe levels; derivates trading continues growing; requirements for how much capital banks need to hold to make them more resilient to market downturns have been raised but are still too low; the rich have become richer; the big banks (‘too big to fail’) grow even bigger. And … rating agencies remain open for manipulation.

In the first phase of the crisis, rating agencies warmly recommended junk products to investors for far longer than they should have. The reason is that issuers (sellers of the junk) paid the agencies in order to get triple A-ratings. This ‘issuer pays model’ has not been changed. It is amazing to see how the financial lobby has kept control of policy. Their main tactic is claiming that strong regulation of the financial world would damage competitiveness and cost jobs. Painful ironically give the loss of so many jobs the failing of financial institutions have cost.

Gillian Tett called it last Friday in the Financial Times: ‘Insane financial system lives on post-Lehman’. The OECD warned that banks are still Eurozone’s weak link…