The
Bank of England's supervision department failed to spot the rot on
time. Depositors were - partially - compensated by the main
shareholder of the bank, an Arab sheikh. The story repeated itself
with Nick Leeson and his unauthorized disastrous trades which
brought down the venerable and veteran Barings Bank in 1995.
The combination of black money, shoddy financial controls, shady
bank accounts and shredded documents renders a true account of the
cash flows and damages in such cases all but impossible. There is no
telling what were the contributions of drug barons, American off-
shore corporations, or European and Japanese tax-evaders - channeled
precisely through such institutions - to the stratospheric rise in
Wall-Street in the last few years.
But there is another - potentially the most pernicious - type of
asset bubble. When financial institutions lend to the unworthy but
the politically well-connected, to cronies, and family members of
influential politicians - they often end up fostering a bubble.
South Korean chaebols, Japanese keiretsu, as well as American
conglomerates frequently used these cheap funds to prop up their
stock or to invest in real estate, driving prices up in both markets
artificially.
Moreover, despite decades of bitter experiences - from Mexico in
1982 to Asia in 1997 and Russia in 1998 - financial institutions
still bow to fads and fashions.
Pages:
71
72
73
74
75
76
77
78
79
80
81
82
83
84
85
86
87
88
89
90
91
92
93
94
95