Thursday, November 5, 2009

They Really Said It ! [3]

One of the common refrains heard in the aftermath of the financial crisis was, "no one saw that coming". This is quite false, as their were a number of prominent thinkers who had been warning about the crisis.

But this is not the first time euphoria has given rise to a crisis. It has happened many times before and will continue to happen.

During the S&L crisis, the then FDIC chairman Bill Seidman oversaw the unraveling process. He was a frequent commentator on CNBC. He has left us - and more importantly to the regulators and lawmakers - this famous advice.
Instruct regulators to look for the newest fad in the industry and examine it with great care. The next mistake will be a new way to make a loan that will not be repaid.
When did he write this ? In 1993 !

Of course, such advice is meant to be ignored. And after every crisis there will be a legion of experts who will proclaim the impossibility of predicting the outcome.

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