Among the cities under pressure in the wake of the financial crisis is New York. And it is there that business leaders and economists recently got the chance to debate the issues at the first ever New York Forum. One politician who attended spoke out about the public anger over the crisis.
Christine Lagarde, the French Minister of Economic Affairs, told euronews: “Not only do I understand the anger, I share the anger. And I certainly hope that now and going forward, banks and financial institutions will have learnt the lessons, and will have digested it, so that they do not repeat the kind of behaviour, the kind of compensation schemes that applied in the past.”
But despite government reform plans, some are voicing concern that politicians are too focused on elections and not enough on finding solutions.
James Wolfensohn, the former president of the World Bank said: “We need good leadership at the level of government in the United States, in Europe, and we need to have a recognition of the reality, that we have to go back and look at our education systems, to look at the things that we’re strong in, look at living within our means, and setting a programme that will be over five or ten years, to get things back to normal.”
The organisers of the forum say they wanted to make sure the voice of business is heard as new regulations are drawn up. But academics wonder if the lessons of the past really have been learnt.
Edmund Phelps, winner of the 2006 Nobel Prize in Economics, told euronews: “Nothing is being done to deal with pathological speculative behaviour. Nobody talks about that at all, and that really lies at the heart of the problem.”
Amar Bhide, a visiting scholar at Harvard University’s Kennedy School, said: “We don’t understand the fundamentals of how risks should be taken by the financial industry – and of course the financial industry should be taking risks – but we don’t understand how it should be taking risks. We don’t understand how risks should be dealt with and who should be taking it. And because we don’t understand it, we don’t have a good way of dealing with it.”
But financial firms reject widespread claims in the media that it’s “business as usual” after the crisis, and that nothing has been done by the industry to prevent reckless behaviour.
Deven Sharma, the President of Standard and Poor’s said: “We have made a lot of changes, for example in the analytical area. We have added a number of checks and balances. We’ve put more accountabilities on our selves and continue to have more transparency in the disclosure of what we do.”
Deborah Bailey, a director at Deloitte & Touche, and former Deputy Director at the Federal Reserve, said: “Financial institutions have taken a step back. They have strengthened their governance systems, their processes. They’ve put in committees that are really much more risk-focused. I think the risk management function within institutions has been much much more elevated.”
There is no doubt that confidence that the crisis is behind us is on the rise in many countries. But there are warnings that governments, businesses and the markets must do more to work together, to restore the public’s trust in the world of finance.