Articles on Finance & Pensions
By Oskari Juurikkala
The global financial crisis has prompted numerous calls for regulatory reform in areas such as banking, hedge funds, financial innovation and executive compensation. Reforms may be needed. But the first and most fundamental changes must take place in the human heart.
As various diagnoses and prescriptions for ailing financial markets continue to issue from the world’s governments, it is worth remembering that all such tinkering has limits. Human motivation is too complex to be controlled by the intentions of policymakers.
In a recent meeting on financial system reform, President Bush defended "free markets, free enterprise and free trade." Very well. But one must not forget that without moral principles and virtue, freedom is but a mask for iniquity. This has been clearly seen in the market for complex financial derivatives.
Many assert that the ongoing financial crisis was caused by rampant capitalism and free-market economics. I disagree – not because I'm a hard-nosed conservative or a reckless libertarian, but because it's the conclusion one reaches by a reasoned analysis of the facts.
It is becoming clear that many Western countries are plunging into economic recession. Instead of lamenting the situation, we should ask: What can we learn from this? What does the experience of the past 20 years teach us?
The global financial system is in a deepening crisis, largely due to greedy gambles with complex financial derivatives. The bailout of Bear Stearns Cos., in which the Fed provided $30 billion loan to J.P. Morgan Chase to acquire the investment bank, is only the latest -- and probably not the last -- rescue mission from the central bank. Overall, the response of the Bernanke-led Federal Reserve to the global financial meltdown has been exceedingly simple: lower interest rates.
“Greed is good,” insisted Gordon Gekko in the 1987 film Wall Street. Most of us disagree. Recent events in the mortgage lending industry prove us right.
The “subprime loan crisis” has been making headlines since it began in August. It refers to the fact that a relatively high percentage of mortgages offered to people with significant probability of default have gone sour.
By Kishore Jayabalan
One program everyone in Washington seems to be leery of is Social Security. Whether it is because of ideologically supporting the program or afraid of ruining a political career, Social Security, again, may remain untouched. Political culture has taught elected officials to avoid the topic of reforming Social Security.