Sozialalmanach - Caritas Luxembourg

What governments are reduced to simply recognizing is that the financial system failed.
Blame is placed on unfettered financial behavior driven by excessive risk-taking in the
pursuit of corporate and personal financial gain. The financial behavior in turn has been
exacerbated by grossly inadequate regulation and oversight. With “banks too big to fail”,
the whole process has led to systemic risk being fully realized. Banks were on the brink
of collapse and the ensuing financial crisis caused in turn the widespread economic crisis.
What politicians and the public at large retained were banking greed and incompetence.
Trust in the financial sector has withered and the reputation of banks and other financial
services providers alike is now at its lowest ebb ever. With citizens as taxpayers footing the
bill of a few individuals perceived as irresponsible if not corrupt, small investors seeing
their life savings destroyed and workers seeing their jobs lost, there is much outrage, anger
and anxiety throughout society worldwide. While it must be recognized that all financial
professionals are not at fault and culprits, “guilt by association” plays into the state of
affairs. The whole financial sector is indeed profoundly tainted in the eyes of most all.
Business no longer as usual
For the financial system to contribute, as it must, to overcoming the crisis, there is need
for profound changes in financial behavior as embodied in business practices. Government
response is based on the notion that the banker and other financial services providers
cannot be left to themselves to reform their behavior. Government must therefore increase
regulation and oversight of the financial sector.
In America, the need for profound reform is epitomized by the unwillingness of some of
the large banks particularly to recognize that business can no longer be as usual. Diehards,
like Goldman Sachs, maintain business as usual by keeping huge bonus package incentives
and falling back on the well-ironed business justification that the activities they do are
legal, whatever their unintended social and economic consequences are. The rationale
given by Goldman Sachs and others that it is OK to help the Greek government to fudge
its public debt exposure through structured products as “it is not illegal” says much on the
culture and attitudes still prevailing in certain banking circles. Duty is here fully reduced
to compliance only with the law.
What more is, governments recognize that they must work together through enhanced
cooperation in order to deal more effectively with the global nature of financial operations.
The concerns here pertain to the avoidance of unfair competition amongst nations in
promoting their own individual financial centers and the closure of loopholes that provide
banks and other financial services providers with the ability to undertake operations, or to
shift operations between national jurisdictions and their financial centers, so as to avoid
regulation and oversight.
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