Tuesday, November 18, 2008

Volcker issues dire warning on slump

Paul Volcker, the former chairman of the US Federal Reserve, has warned that the economic slump has begun to metastasise after a shocking collapse in output over the past two months, threatening to overwhelm the incoming Obama administration as it struggles to restore confidence.

Here's the interesting bit.

Even so, he said the arch-culprit was the bonus system that allowed bankers to draw forward "tremendous rewards" before the disastrous consequences of their actions became clear, as well as the new means of credit alchemy that let them slice and dice mortgage debt into packages that disguised risk.

I actually agree that allowing bankers to take bonuses before there are profits is silly.


CityUnslicker said...

horses and stabel doors.

it will be decades before we get back into that position.

Mrs Smallprint said...

No bankers in court so far, why not?

AntiCitizenOne said...

> No bankers in court so far, why not?

They didn't do anything illegal?

The root cause of the credit crunch is of course, the government! They are the party that massively increased the credit/debt in the economy.

I believe the banks did quite well in their job of allocating this temporary money. I thought things would blow up in 2006+