Previous strategic incompetence in banking

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Watched a great TV series recently The Ascent of Money presented by Professor Niall Ferguson. If you cannot view it, the book is probably good too. It makes the dry and obscure world of banking and its origins brilliantly accessible. One little nugget in the latest episode reminded me, though, that it’s not long since the last time those clever folk in banking messed up so badly that governments had to bail out the disaster at our expense – remember emerging market debt? Our own Gordon Brown became a hero by getting the developed economies to sign up to “The Enhanced HIPC Initiative” pledging $100 billion to 26 countries with unsustainable debt burdens at Cologne in 1999. That time huge loans were given not to sub-prime consumers but sub-prime countries! And just as this time round, what was not a bad idea on a small and cautious scale blew up because the banks and the analysts that drive their behavior went over-board. If you want a lively telling of the story, see the Wikipedia entry on developing countries’ debt, complete with dire warnings about ‘weasel words’ and ‘biased’ commentary [though it looks reasonably accurate to me] – or a more dispassionate entry under emerging market debt.

So – do top executives in banking have to achieve any qualification in strategic management at all? [Probably not – because there isn’t one.] So just how do they have to demonstrate their competence before being given the power to mess up all our lives? Perhaps some of them or their consultant advisors would like to explain themselves.

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