Don't mention the GFC

I know, the global financial crisis (GFC) is over, and shouldn't be discussed in polite conversation anymore.
But for students of recent history this speech by Howard Davies, director of the London School of Economics, at the 75th anniversary of the Reserve Bank of NZ is an educational and entertaining read.

Davies describes himself as a "hybrid insider/outsider", having served previously as the deputy governor of the Bank of England and the chair of the UK regulator the Financial Services Authority while maintaining a current spot on the Morgan Stanley board and audit committee.

Really, he's the ideal GFC scapegoat.

In the speech Davies does, in fact, accept some personal responsibility for the financial excesses enjoyed in the pre-GFC decade."... I would certainly accept that when I was a regulator I shared the view that the financial system could operate with relatively low levels of capital, and also the view that financial innovation was, by and large, a good thing," he says in the speech. "Those assumptions have now been challenged."

However, Davies does spread the blame a bit more evenly, detailing what went wrong and how we might go about fixing it. He's also raises a few laughs, which is quite a trick to pull off in the circumstances.

It's a polished performance, as you might expect from someone who uses the correct plural form of forum (fora), but there's also substance. And a warning that, with markets on the rise and 'normality' apparently resuming, the lessons of the GFC are being forgotten already and the opportunity for change, lost.

"One rather depressing feature of many current analyses of the causes of the crisis is that people are now retreating into the positions they held before it started. For a time, there were signs of a very open debate, with financial firms and even politicians showing remarkable open mindedness and willingness to challenge received opinions. Now the initial shock is fading," Davies says.

"So the Wall Street journal editorial pages have concluded that they were right all along, and that the problem was excessive government interference in the markets. Politicians on the left have decided that they were right all along, in believing that unbridled capitalism carried within it the seeds of its own destruction."

 

David Chaplin

 

Pictured: Howard Davies