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Published on September 15th, 2008 | by Chris Milton

21

Lehman Brothers Collapse: New Financial Architecture Required

Switching on the radio this morning, the reaction to Lehman Brothers’ bankruptcy was sobering to say the least. No more “Aww .. it’s OK, it’ll get better”. Now it was:

“It may be past time to panic already. These are certainly seismic events.” Terry Smith, Chief Executive at Tullett Prebon, leading Internet Stock Brokerage

“This is not stress testing, this could be testing where the failure point lies.” John Moulton, Alchemy Partners, leading Private Equity providers.

Time and time again there was discussion of the architecture of modern market capitalism, leading to dark predictions that other “buildings” could easily collapse before a new architecture would emerge.

All of which reminded me of the earthquake which hit China several months ago.

There, a single seismic shock flattened hundreds of schools while the buildings around them remained standing. In some towns an entire generation was almost wiped out.

No one called for an end to schools or children to avert another disaster. Instead they called for an end of corruption and a new regulatory framework to ensure future schools were built using proper materials.

Similarly, the architecture of the money markets and how they’ve become intertwined with personal banking and business operations has now been shown to be flawed and unsustainable.

We need a new economic architecture, one which will ensure that all the aspects of a successful economy are mutually supporting and continuously sustainable.

And here and now is where that discussion begins. What are the worst flaws in the old architecture? What improvements would introduce in a new architecture?

Or is this talk nonsense and we can continue as we are, continuously reliving the pain of a bust to bring about the rapture of a boom?

I’d love to hear your views! Add your comments below or start a new discussion thread in the Green Options Forum.

Related Posts:
Establishment of the Lehman Brothers Center for Global Finance and Economic Development at Spelman College
Chicago Green Exchange: A Model for Green Retail?
World Economic Forum Honors Social Entrepreneurs and Calls For Fast Reform





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About the Author

is a seasoned sustainability journalist focusing on business, finance and clean technology. His writing's been carried by a number of highly respected publishers, including The Guardian, The Washington Post and Scientific American. You can follow him on twitter as @britesprite, where he's one of Mashable's top green tweeters and Fast Company's CSR thought leaders. Alternatively you can follow him to the shops... but that would be boring.



  • http://www.preventiveway.com Marcos Levy

    If we want to change the world we need to change the men before. Institutional social responsibility is essential to get collaboration to remodeling the economy and our social structures for a better world.
    Leadership has to be people centered instead of profit center, at the end profits will be the indisputable result

  • http://www.preventiveway.com Marcos Levy

    If we want to change the world we need to change the men before. Institutional social responsibility is essential to get collaboration to remodeling the economy and our social structures for a better world.
    Leadership has to be people centered instead of profit center, at the end profits will be the indisputable result

  • http://www.britesprite.co.uk Chris Milton

    Absolutely Marcos.

    The whole driver behind current market problems is not how much the debt is out there but how companies are being mis-valued by the market.

    For instance, in the UK easily the largest retail banking operation, HBOS, has just been bought by the fourth largest, Lloyds-TSB. HBOS wasn’t in trouble, it was simply a question of how the market was mis-valuing it.

    I’ll be blogging about value next week, so thank you for being ahead of the curve :) and I look forward to more of your insights.

    Chris

  • http://www.britesprite.co.uk Chris Milton

    Absolutely Marcos.

    The whole driver behind current market problems is not how much the debt is out there but how companies are being mis-valued by the market.

    For instance, in the UK easily the largest retail banking operation, HBOS, has just been bought by the fourth largest, Lloyds-TSB. HBOS wasn’t in trouble, it was simply a question of how the market was mis-valuing it.

    I’ll be blogging about value next week, so thank you for being ahead of the curve :) and I look forward to more of your insights.

    Chris

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  • Jade

    I don’t feel sorry one damned bit for the people at Lehman. As was pointed out in the news reports, almost every employee there is rich. They’re laughing all the way to the bank, believe me.

    I think we should let the banks collapse, let the economy collapse, and build it back from scratch…the right way…the way it was before.

    This country needs a wakeup call, and letting it fall might just be what it needs.

  • Jade

    I don’t feel sorry one damned bit for the people at Lehman. As was pointed out in the news reports, almost every employee there is rich. They’re laughing all the way to the bank, believe me.

    I think we should let the banks collapse, let the economy collapse, and build it back from scratch…the right way…the way it was before.

    This country needs a wakeup call, and letting it fall might just be what it needs.

  • http://www.britesprite.co.uk Chris Milton

    You know Jade …. it’s difficult not to agree with you.

    In fact, if it wasn’t for the huge amounts of human suffering such a course of action would engender I think I’d advocate it.

    As it is, most experts seem to agree that capitalism driven solely by profit is at an end. The trouble is, everyone still talks about “saving the system” when it’s blindingly obvious its the system which needs changing!

    Best wishes — Chris

  • http://www.britesprite.co.uk Chris Milton

    You know Jade …. it’s difficult not to agree with you.

    In fact, if it wasn’t for the huge amounts of human suffering such a course of action would engender I think I’d advocate it.

    As it is, most experts seem to agree that capitalism driven solely by profit is at an end. The trouble is, everyone still talks about “saving the system” when it’s blindingly obvious its the system which needs changing!

    Best wishes — Chris

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  • http://www.simplyhalalmortgages.com Halal Mortgage

    There no doubt about it, it’s pretty tough out there. Whats worrying is the size of this problem, its much bigger than anyone imagined.

  • http://www.simplyhalalmortgages.com Halal Mortgage

    There no doubt about it, it’s pretty tough out there. Whats worrying is the size of this problem, its much bigger than anyone imagined.

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