Bonus

Did Lehman Brothers die in vain?

Having once worked for Lehman Brothers and having championed financial reform long before it became fashionable subject, I have strong opinions on the issue. Just as I was about to write something for the 5th anniversay of Lehman's collapse, a Good Samaritan sent me this transcribed text of a keynote speech I had made at the 2nd anniversary of the collapse. After browsing through it, I decided it did not need any editing -  so here goes… It is also a good précis of my book that you can download here. You might also want to read my recent FT op-ed on how financial reform is lagging behind and a piece I wrote on what a good banking system ought to look like. Enjoy!

The world has been rocked by the most major financial and economic crisis in recent history. This exposed several aspects of financial system dysfunction. These not only increased the instability of the financial markets, but also impeded their normal functioning as tools to allocate economic resources efficiently throughout the real economy.

The collapse of Lehman Brothers two years ago was at the heart of this crisis. This is not a Eulogy to Lehman Brothers. That having been said, Lehman in death managed what it could not do while alive – be more famous than its peers Goldman Sachs and Morgan Stanley. In death, Lehman may have performed a greater service for society than it did perhaps in the many decades of its existence – provided of course that we have learnt the right lessons from its failure and acted on them. Did Lehman die in vain? 

Why we must cap banker bonuses

Note: This is the original longer version of an Opinion Piece arguing for imposing caps on banker bonuses that appeared in the Guardian newspaper on the 25th of Feb 2013.

The European parliament is right to limit the maximum bonus bankers can command as a proportion of base salary. This will help tackle the culture of excessive risk-taking and the bending of rules that has now become endemic to banking. Undertaking this at an EU-wide level will also limit any large-scale migration of the so-called ‘talent’. It will reduce the risks borne by tax-payers and go a long way to rehabilitate the industry, making it focus on serving the real economy again.

Seven Lessons from Finance as a Traffic System

Causes of the Financial Crisis

The world has still not recovered from the most serious financial and economic crisis in recent history. This exposed several aspects of financial system dysfunction which not only increased the instability of the financial markets but also impeded their normal functioning as tools to allocate economic resources efficiently throughout the real economy. Policy maker response to this crisis remains very inadequate and will do little to correct the deep structural flaws exposed by the crisis. 

In this new set of blog posts, we will serialize our 2009/2010 e-book "The Financial Crisis - Causes & Cures" which was written for both the layperson as well as policy-makers at the European Parliament, the European Commission and national finance ministries and regulators. The book may be a bit dated, but the issues are current.

Lehman Brothers is Dead - Long Live Lehman Brothers

Transcript of a Keynote Speech I delivered In Berlin on the 15th Sept 2010

The world has been rocked by the most major financial and economic crisis in recent history. This exposed several aspects of financial system dysfunction. These not only increased the instability of the financial markets but also impeded their normal functioning as tools to allocate economic resources efficiently throughout the real economy.

Financial Transaction Taxes: Tools for Progressive Taxation and Improving Market Behaviour

Financial Transaction Taxes: Tools for Progressive Taxation and Improving Market BehaviourThe discussion on financial transaction taxes is reaching a climax. There have been several suggestions for the form such a tax should take and many estimates for how much revenue levying such taxes would generate often running into hundreds of billions of dollars. 

In a new Re-Define policy brief we have addressed the all important question of the incidence of financial transaction taxes, seeking to answer the question ‘who pays in the end’, should FTTs be widely introduced. We also demonstrate how a differentiated transaction tax regime can address market behaviour issues such as churning and excessive short termism as well as help reduce systemic risk.