News / Economy

Financial Crisis Offers Lessons for Future

The Lehman Brothers corporate sign in polished metal is taken into an auction house in London, Friday, Sept. 24, 2010.The Lehman Brothers corporate sign in polished metal is taken into an auction house in London, Friday, Sept. 24, 2010.
x
The Lehman Brothers corporate sign in polished metal is taken into an auction house in London, Friday, Sept. 24, 2010.
The Lehman Brothers corporate sign in polished metal is taken into an auction house in London, Friday, Sept. 24, 2010.
Four years ago, the collapse of Lehman Brothers, a huge financial firm, marked the start of the worst recession in decades.  Frightened investors dumped stocks, banks stopped lending, the economy shrank, and millions of people lost jobs, homes, and savings.  The crisis prompted financial firms and regulators to make changes intended to prevent another financial disaster.  But some experts say it could happen again.
 
Since the crisis, committees investigated what went wrong, regulators demanded that banks take less risk, and Congress passed new laws.  Many of the regulations that spell out the practical details of these laws are still being written, amid intense lobbying by financial firms and other interests. 
 
Prosecutions for alleged fraud have frustrated one key investigator who says they have mostly targeted low-ranking people.  Bart Dzivi, was Special Counsel to the Financial Crisis Inquiry Commission. "They have not really focused on trying to round up the senior officers at the major institutions who may have had criminal culpability," he said. 
 
Dzivi says the investigations have been under-funded and inadequately staffed. 
 
Author John Taft says it will take more than prosecutions and new laws to clean up the financial industry.  He is CEO of RBC Wealth Management and wrote a book titled Stewardship which examines the lessons from the crisis.
 
Taft says Wall Street lost its way when firms stopped focusing on clients and pushed purely for profit. “That’s when we got in trouble.  The culture of Wall Street was broken going into the financial crisis and it has not yet been fixed," he said. 
 
Author and college professor Craig Columbus says Wall Street is still plagued by over-confidence and arrogance. "That’s an element of hubris, that there is this notion that there are no limits, there are no boundaries to human imagination and capabilities, and I think that is clearly wrong," he said. 

In his book God & Man On Wall Street, Columbus says the public still distrusts the financial industry even though stock prices have rebounded from severe losses.  
 
Investors dumped stocks out of fear that more huge financial firms might go bankrupt, including some that were so large that their failure could damage the economy.
 
Boston University finance teacher Mark Williams wrote Uncontrolled Risk, and is still worried about the impact of faltering financial giants. "We are worse off then we were.  From the standpoint that we have concentration risk.  The big banks are just getting bigger," he said. 
 
Larry McDonald is co-author of the best-selling book Colossal Failure of Common Sense.  He says it is time to strengthen regulatory agencies and staff them with courageous people who can match wits with the sophisticated leaders of top financial firms. "You need a risk-taker to manage some of these decisions, because risk-takers know how to manage risk-takers," he said. 
 
McDonald says four years after the Lehman crash, the risks to the economy are "higher than ever."
 

You May Like

Turkey's Controversial Reform Bill Giving Investors Jitters

Homeland security reform bill will give police new powers in search, seizure, detention and arrests, while restricting the rights of suspects, their attorneys More

Audio Slideshow In Kenyan Prison, Good Grades Are Path to Freedom

Some inmates who get high marks could see their sentences commuted to non-custodial status More

'Rumble in the Jungle' Turns 40

'The Champ' knocked Foreman out to regain crown he had lost 7 years earlier when US government accused him of draft-dodging and boxing officials revoked his license More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Victorious Secularists Face Challenge to Form Government in Tunisiai
X
Henry Ridgwell
October 30, 2014 11:39 PM
Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Victorious Secularists Face Challenge to Form Government in Tunisia

Official results from Tunisia show the Islamist Ennahda party has failed to win the second free election since the so-called "Arab Spring" uprising in 2011. Ennahda, which handed power to a government of technocrats pending the elections, lost out to the secular party Nidaa Tounes. Henry Ridgwell reports from London that the relatively peaceful poll offers some hope in a volatile region.
Video

Video Africa Tells its Story Through Fashion

In Africa, Fashion Week is a riot of colors, shapes, patterns and fabrics - against the backdrop of its ongoing struggle between nature and its fast-growing urban edge. How do these ideas translate into needle and thread? VOA’s Anita Powell visited this year’s Mercedes Benz Fashion Week Africa in Johannesburg to find out.
Video

Video Smugglers Offer Cheap Passage From Turkey to Syria

Smugglers in Turkey offer a relatively cheap passage across the border into Syria. Ankara has stepped up efforts to stem the flow of foreign fighters who want to join Islamic State militants fighting for control of the Syrian border city of Kobani. But porous borders and border guards who can be bribed make illegal border crossings quite easy. Zlatica Hoke has more.
Video

Video China Political Meeting Seeks to Improve Rule of Law

China’s communist leaders will host a top level political meeting this week, called the Fourth Plenum, and for the first time in the party’s history, rule of law will be a key item on the agenda. Analysts and Chinese media reports say the meetings could see the approval of long-awaited measures aimed at giving courts more independence and include steps to enhance an already aggressive and high-reaching anti-corruption drive. VOA’s Bill Ide has more from Beijing.
Video

Video After Decades of Pressure, Luxembourg Drops Bank Secrecy Rules

European Union finance ministers have reached a breakthrough agreement that will make it more difficult for tax cheats to hide their money. The new legislation, which had been blocked for years by countries with a reputation as tax havens, was approved last week after Luxembourg and Austria agreed to lift their vetoes. But as Mil Arcega reports, it doesn’t mean tax cheats have run out of places to keep their money hidden.
Video

Video Kobani Refugees Welcome, Turkey Criticizes, US Airdrop

Residents of Kobani in northern Syria have welcomed the airdrop of weapons, ammunition and medicine to Kurdish militia who are resisting the seizure of their city by Islamic State militants. The Turkish government, however, has criticized the operation. VOA’s Scott Bobb reports from southeastern Turkey, across the border from Kobani.

All About America

AppleAndroid

World Currencies

EUR
USD
0.7893
JPY
USD
107.68
GBP
USD
0.6238
CAD
USD
1.1214
INR
USD
61.185

Rates may not be current.