Gillian Tett writes in the Financial Times that, while much has changed since Lehman Brothers went belly-up five years ago, little is really different, particularly these six peculiar features that, collectively, don’t make for a much safer financial system:
● The shadow banking world is taking over more activity, not less.
● The system depends more than ever on investor faith in central banks.
● The rich have become richer.
● Financiers have been prosecuted – but not for the credit bubble.
● Fannie and Freddie are alive and well.
An optimist might argue these six factors are just temporary distortions; some observers might insist they were inevitable. Housing would have suffered badly without Fannie and Freddie underwriting the mortgage market, for example. But if nothing else, these issues are a potent illustration of the law of unintended consequences, and a powerful reminder of the vast amount of work still to be done before we have a financial world that looks both sane and safe.
The view that we’re not any safer now than prior to the financial crisis is clear to see in this new Pew Research poll where nearly two-thirds of respondents said we are no more secure than prior to the crash. About the only aspect of the financial system where there is a clear consensus is that stock prices have moved higher since their 2008-2009 drubbing.