The ability to recognize and admit our errors is a crucial step in the path to recovery and healthy progress. When the credit crash first hit in 2007, banks began bursting. I remember a few moments of candid admission such as one terrified CEO lamenting, “We are getting to a time when we will all look back and wish we had done things differently.” That was then and a fleeting flash. Banks began begging governments to rescue them or face promised Armageddon for all. Their fears were contagious, their threats successful. They extorted tax payer funds in the final hour–and bounced. A few months later the financial elite acted as if none of it had ever happened. They resumed old ways of levering up and bonusing out.
Unfortunately for all of us, our governments and policies enabled a dangerous financial sector, allowing them to escape the experience without having to repent or reform. So the boil was not lanced. The pain is not yet past, and the world economy is continuing to suffer ad nauseam. There is no escaping this. We can either admit, repent and reform, or we will continue to pay and lose until we do. The choice is ours.
One of the hideous legacies of protecting people from the consequences of their bad behaviour, is that many are now vigorously rewriting history–busily devising scapegoats and fantasy about the what, who and whys of what happened. We must not leave this unchecked, unconfronted–lies will not serve our recovery. We must face the facts as painful as it may feel. Whether it be for acts of commission or omission, in truth, there is some blame in this for all sides. This article from Barry Ritholtz is a good start:
Why are people trying to rewrite the history of the crisis? Some are simply trying to save face. Interest groups who advocate for deregulation of the finance sector would prefer that deregulation not receive any blame for the crisis.
Some stand to profit from the status quo: Banks present a systemic risk to the economy, and reducing that risk by lowering their leverage and increasing capital requirements also lowers profitability. Others are hired guns, doing the bidding of bosses on Wall Street.
They all suffer cognitive dissonance — the intellectual crisis that occurs when a failed belief system or philosophy is confronted with proof of its implausibility.
And what about those facts? To be clear, no single issue was the cause. Our economy is a complex and intricate system. What caused the crisis? Look…
Read: What caused the financial crisis? The big lie goes viral for the 12 key causes as a template to understand the changes needed now to reform our system.
See also this excellent article from Paul Volcker: Financial Reform: Unfinished Business.