The Financial Crisis
In the present financial climate it is interesting to look back on previous ‘crashes’, in particular the Wall Street crash of the 1920s. Like today’s crisis this was caused by reckless behaviour by bankers and financiers and it led to an appalling depression in theUSAwith similar consequences for theUK. The way out of that depression was led by President Roosevelt. When he was elected in 1933, in his inaugural speech, he said: “Rulers of the exchange of mankind’s goods have failed through their stubbornness and their incompetence. Practices of the unscrupulous money changers stand indicted in the court of public opinion, rejected by the hearts and minds of men”, and, “Finally in our progress towards a resumption of work we require two safeguards against a return of the evils of the old order: there must be strict supervision of all banking and credit and investment; there must be an end to speculation with other people’s money; and there must be provision for an adequate but sound currency”. He also said that at times when the country’s financial situation is bad the last thing that should be done is to cut back investment in education. He went on to initiate a ‘New Deal’, which included better welfare provision and a programme of investment in public projects. At the same time new regulations were introduced in theUSAto curb banker’s recklessness. The Banking Act of 1933 established a Federal Deposit Insurance to cover banking deposits, it also required a complete separation between investment and commercial banking and it prohibited investment bankers from serving as officers of commercial banks. The Federal Reserve was allowed to control interest rates offered on deposits. TheUSwent on to enjoy an era of unprecedented prosperity. The Banking Act remained in force until 1988, when some clauses were removed, in1999 the Banking Act was repealed and the banks and financial transactions were deregulated. The repeal of this act was probably an inevitable consequence of the Big Bang in the London Stock Exchange introduced by Mrs Thatcher’s government in 1988, when practically all regulations were lifted, this deregulation attracted American investors to theLondonmarket andNew Yorkhad to follow suit.
Do we never learn from the past?
Director’s and Executive’s Remuneration
Their pay has now reached ridiculous heights and no longer bears any relationship to reality. For the FTSE 100 top directors and executives to give themselves a near 50% rise this year, when their companies’ shares have not grown in value and their companies have not increased in profitability to match, is an insult to the rest of us. Politicians, the media, the church and the public, have all expressed their disgust but the response of these moguls has been two fingered. The top ten most highly paid executives ranged from