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

Computer Crash Halts US Visa, Passport Operation

Problems with database have resulted in extensive backlog of applications, affected State Department's consular offices all over the world More

Migrant Issues Close to Home Spur Groups to Take Action

Groups placing water, food in the desert, or aiding detainees after release, have one common goal: no more deaths of migrants crossing illegally into the US More

World Bank: Boko Haram Stalls African Aid Projects

Islamist group’s terrorism sets back agriculture, health efforts in Cameroon, Chad and Nigeria More

Featured Videos

Your JavaScript is turned off or you have an old version of Adobe's Flash Player. Get the latest Flash player.
Israel Targets Gaza Supply Tunnelsi
X
July 24, 2014 4:42 AM
The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video Israel Targets Gaza Supply Tunnels

The Israeli military has launched a ground operation in Gaza to destroy the myriad tunnels that may have been used to smuggle weapons to Hamas. VOA's Zlatica Hoke reports that could mean more hardship for the people of Gaza, who obtain some of their essential supplies through these underground passages
Video

Video MH17's 'Black Boxes' Could Reveal Crash Details

The government of Malaysia now has custody of the cockpit voice and flight data recorders from Malaysia Airlines Flight 17, which was hit by a missile over Ukraine before crashing last week. As VOA's Carolyn Presutti reports, the so-called black boxes may hold information about the final minutes of the flight.
Video

Video Living in the Shadows Panel Discussion

Following a screening of the new VOA documentary, "AIDS - Living in the Shadows," at the World AIDS conference in Melbourne, a panel discussed the film and how to combat the stigma associated with HIV/AIDS.
Video

Video IAEA: Iran Turns its Enriched Uranium Into Less Harmful Form

Iran has converted its stockpiles of enriched uranium into a less dangerous form that is more difficult to use for nuclear weapons, according to the United Nations’ Atomic Energy Agency. The move complies with an interim deal reached with Western powers on Iran's nuclear program last year, in exchange for easing of sanctions. Henry Ridgwell reports for VOA from London.
Video

Video Relic of Saint Draws Catholics Worried About Immigration Issue

A Roman Catholic saint who is a figure of devotion for those crossing the border into the United States is attracting believers concerned about the plight of undocumented immigrants. Mike O'Sullivan reports from Los Angeles, where a relic of Saint Toribio has drawn thousands to local churches.
Video

Video US Awards Medal of Honor for Heroics in Bloodiest of Afghan Battles

U.S. combat troops are withdrawing from Afghanistan, on pace to leave the country by the end of this year. But on Monday, U.S. President Barack Obama took time to honor a soldier whose actions while under fire in Afghanistan earned him the Medal of Honor. VOA's Jeff Seldin has more from the Pentagon.
Video

Video Ukraine Rebels Surrender MH17 Black Boxes

After days of negotiations, a senior separatist leader handed over two black boxes from an airliner downed over eastern Ukraine to Malaysian experts early Tuesday. While on Monday, the U.N. Security Council unanimously demanded that armed groups controlling the crash site allow safe and unrestricted access to the wreckage.
Video

Video In Cambodia, HIV Diagnosis Brings Deadly Shame

Although HIV/AIDS is now a treatable condition, a positive diagnosis is still a life altering experience. In Cambodia, people living with HIV are often disowned by friends, family and the community. This humiliation can be unbearable. We bring you one Cambodian woman’s struggle to overcome a life tragedy and her own HIV positive diagnosis.

AppleAndroid

World Currencies

EUR
USD
0.7305
JPY
USD
101.53
GBP
USD
0.5830
CAD
USD
1.0656
INR
USD
60.075

Rates may not be current.