With the collapse of Lehman Brothers a year in the past and the economy on the road to recovery, many participants in the financial services industry are questioning whether the industry still needs to undergo substantial regulatory change, and what changes, if any, could be beneficial at this point.
“There is no way to write legislation that will prevent all future crises,” said Sean Collins, senior director of industry and financial analysis at the Investment Company Institute, at the ICI’s tax and accounting conference in Lake Buena Vista, Florida. “We have to form legislation that’s realistic and helps financial institutions be resilient, and can help institutions take the shocks as they come. If you prevent the formation of capital, you prevent businesses from taking entrepreneurial risks.”
Last year’s crisis was caused by a colossal failure of leadership among top industry and government leaders, and many of those same leaders are now claiming credit for the recovery, said Andrew Lowenthal, president of Porterfield & Lowenthal, LLC.
“For some reason, we all have the notion that the only people who can save us are the very people who drove us to the brink,” he said. “The people who led us to this are all patting themselves on the back now.”
“There is a lack of desire to hold people accountable,” Lowenthal continued. Now that the worst is over, Wall Street wants everything to go back to the way it was in 2007, he said.
Lowenthal said the financial services industry should not underestimate the public’s continuing level of hostility towards it.
At a speech at Federal Hall in New York on Monday, President Barack Obama said Wall Street should not get too comfortable.
“Unfortunately, there are some in the financial industry who are misreading this moment,” Obama said. “Instead of learning the lessons of Lehman and the crisis from which we are still recovering, they are choosing to ignore them. They do so not just at their own peril, but at our nation’s. So I want them to hear my words: We will not go back to the days of reckless behavior and unchecked excess at the heart of this crisis, where too many were motivated only by the appetite for quick kills and bloated bonuses. Those on Wall Street cannot resume taking risks without regard for consequences, and expect that next time, American taxpayers will be there to break their fall.”