Yet another thought provoking column from V Anantha Nageswaran (from livemint.com). In this article, the author talks about how financial institutions in America have become so greedy and short-sighted in their approach to making more and more money (not just for themselves, but for their CEOs and Traders and everyone else in the inner circle) that they have forgotten the very basics of investing.
Now when the whole world was raising a hue and cry and providing their valuable 2 pence on the sub-prime mortgage crisis which rocked financial markets worldwide, just over a month ago, I was wondering how was it that most of these so-called financial and market experts missed out on the simple fact that the primary cause of the entire issue was because institutions worldwide assumed on greater risks, and hence the old cliche, “more the risk you take, more the return” came back to bite them bad (only difference being, it wasn’t the return that arrived, but the corollary of the higher risks they took).
The article talks about how American banks are now so used to forcing the Fed Reserve to lower interest rates citing financial instability in the markets as a reason, that they fail to see that it was them in the first place that caused all this instability in the markets.
Interesting read for anybody who is still wondering how and why the whole sub-prime mortgage issue became so big worldwide.