It has been a decade since the banking aristocracy of Lehman Brothers filed for bankruptcy in what would be the chant of doom that became the Global Financial Crisis. It was a Wall Street firm that had lasted some 158 years.
The previous year, the global investment bank Bear Stearns began its decline into financial ruin. The demise of both enterprises revealed, in all too discomforting ways, the manner in which privately made losses can become socialised (or not, as the case might be). The economic calamity also unmasked the unruly nature and dangers posed by an unregulated financial market while revealing the threats posed to the global economy by the banker turned speculator.
Banks on both sides of the Atlantic found a shortage of capital. Too much had been lent in the form of subprime funding to US households, European financial bodies and member states. This resulted in a transatlantic binge of overleveraging, covering debtors from US home buyers to the Greek government.
Suddenly, treasurers and central bankers were begging for acts of socialisation. The neoliberals were in shark retreat. The heralded invisible hand attributed to Adam Smith had miraculously withdrawn itself. Not saving Lehman Brothers was deemed by such figures as Daniel Gros, director of the Centre for European Policy Studies, a mistake of global proportions.
The banks had slumped, requiring propping up by the public purse. Wall Street became a ghost of itself, with such august institutions as AIG, Washington Mutual and Merill Lynch gathered up. Capitalism could no longer be regarded as 'self-cleansing'; bankers, now colloquially known as banksters, could not be permitted to be entirely autonomous and free dealing.
Today, the legacy of Lehman Brothers and the crisis it helped precipitate supply warnings of the next shock. Global debt stands at a boggling amount: some US$215 trillion. Banking, rather than being simplified, is achieving greater levels of complexity. Such institutions, claim Heidi Moore, 'are bigger, more complicated, harder to manage, on the wrong side of history and, evident to everyone, more than ever at risk of hurting everyone if they fail'.
Regulatory efforts are now being wound back. The Basel III international regulatory framework for banks, developed by the Basel Committee on Banking Supervision to 'reduce excessive variability of risk-weighted assets', has not stayed free market nostalgia. In May this year, US President Donald Trump signed into law provisions winding back the oversight mechanisms imposed by the Dodd-Frank Act of 2010.
"Australia's