‘A year of recession, no lessons learned’
October 9, 2009 at 3:56 pm
On the 15th September 2008, Lehman Brothers Holdings, Inc. filed for Chapter 11 bankruptcy protection. At the time, the investment bank was one of the largest financial institutions in the US, employing some 26,000 people. When it finally collapsed, the bank owed $768 billion in bad debt.
Ironically, Lehman provided risk assessment services to major financial institutions, protecting them from mismanagement and insolvency, and helping to develop investment ‘hedge’ funds. The bank ultimately became the archetype of the ‘bad bank’ –a major institution felled by its own debts and misgivings.
One year on, Gordon Brown has warned banking executives against complacency, after the bonus culture that helped distort the UK economy resurfaced anew during August. The Prime Minister echoed recent comments made by US President, Barack Obama, who called for bankers to embrace reform.
Bob Diamond, the puppet master behind Barclays Bank, was handed a £7.4m bonus at the end of last year, bringing his total earnings for the half-decade to £80m. As one of the few banks to survive the recession in one piece, Mr. Diamond ought to be praised, but few could justify spending seven million pounds at the Christmas party.
Harvard professor, Jeffrey Miron, was unhappy with lax executives, content to ignore the rubble of Lehman: “Bankers have learned the lesson that if you take excessive risk you get bailed out. Five or 10 years down the line we could end up with a similar situation all over again."
Experts are convinced that the recession is in decline; the Bank of England vehemently disapproves, but while house prices continue to fall, and unemployment continues to rise, media-driven optimism holds little value for hard-up taxpayers.
This morning, UK unemployment levels reached 2.47m, an increase of 210,000 over the figures for May, June, and July. Britain’s General Union, the GMB, insinuated that unemployment among young people could reach one million – a ‘magic number’ heralding the loss of an entire generation to the Job Centre.
