India was affected, however not as much as many other countries. Prudent Reserve Bank of India policies and regulations of – not-so-easy cash, and not-so-cheap credit helped us control the damage better. Our dependence on domestic economy rather than the export markets insulated us to an extent.
Peter J. Wallison, Financial expert, Author, and Adviser to the US Government put it very bluntly – “U.S. housing policies are the root cause of the current financial crisis. Other players-- greedy investment bankers; foolish investors; imprudent bankers; incompetent rating agencies; irresponsible housing speculators; short sighted homeowners; and predatory mortgage brokers, lenders, and borrowers--all played a part, but they were only following the economic incentives that government policy laid out for them.”
As immediate measures – capital injections were introduced by the Governments, and stress tests were performed on the larger banks. Down payments and income verificationwere re-introduced. Certain anti-speculation regulations got strengthened, certain curbs on bankers’ bonuses were imposed, and regulation of derivatives was expanded. Independence of Central Banks in enforcing monetary and regulatory policies increased. Improvements in accounting and reporting standards were brought in.
Certainly “yes”! So long as “greed and fear” exist, unscrupulousness and naivety exist, herd mentality exists - such a crisis in a different form can occur again. Since early 17th century “Tulip Mania” until 21st century “dot-com” bubble – we have seen many bubbles so far. Will excessive use of credit cards and digital money, hype about the new technologies, hysteria about the crypto-currencies like Bitcoin trigger a crisis in the future? Only time will tell.
Lehman Brothers though, have taught us some lessons: to be on the watch-out for the symptoms of bubbles, to control complexities in financial instruments/processes/systems, monitor and, where possible, eliminate conflicts of interest, beware of schemes which are “too good to be true”, and don’t let a spillover of “Wall Street” (financial markets) on the “Main Street” (real economy).
Manoj is the Head of BVMW - The German Association for Small and Medium-sized Businesses. He is also the Director of Kontakt India, which provides a variety of India-Entry and Scale-up support services to German Mittelstand companies allowing them to focus on their core activities. During his career, he has worked in different industries including pharmaceutical, offshore and engineering across multicultural teams in Europe, Middle East, India, Asia-Pacific and the USA. Manoj holds a Bachelor degree in Economics, Finance and Commerce from the M.L. Dahanukar College as well as prestigious accounting certifications from all around the world.