There is One Good Thing about the Banking Crisis

BriefLetter - Issue 17/2007

If the partially rather risky financing of private property in the United States had not become the trigger of an international banking crisis, one might have been forced to induce such a situation for capital markets to come to their senses and to require consideration for all those values which banks frequently used in their advertising without providing a similar basis for their own actions.

The erroneous assumption, that size is all that matters within globalization, has obstructed the view towards reality of many managers, including bank managers. Then the incomprehensible concept of size was misapprehended in a way that securities were often put into perspective in a venturesome way along with the size of a business.

The effect of all these fatal developments now arrived unexpectedly with full force even though it has been long assumed and occasionally even announced. It is absolutely conceivable that this whole mess in not fully over with, yet.

Why do I say that there is one good thing about the banking crisis? I am convinced that, at least for some time, this crisis put an end to those who play recklessly. For others, who have been too careless in spending and borrowing money, this is a clear indication to keep their eyes open and their wallets closed and to become active only where circumstances permit.

I hope for less mergers and takeovers, more guardedness when taking on new partners, more resistance with corporate finance offers, less fear from globalization, more trust in one’s own strengths. And I wish that legislators become active and create the general conditions which make it tougher to get past the boundaries of security and implement draconic measures for those who cheat recklessly and deliberately.

Successful corporate strategies are not impossible or only conditionally possible, if credits are scarce or if it is a lot tougher to meet the given requirements. To the contrary, I think without solidity it is impossible in the long run to do business.

Growth and performance require a healthy basis and that can’t be had without reputable financing. This is the banks responsibility. The rules of the game need to be mulled over. Ludwig Erhard once issued the slogan: Moderation. Maybe back then, after the Second World War, in a booming era of restructuring the economy this might not have been a very convincing recipe. Today, however, I think it is of foremost actuality. In these coming weeks the business plans for 2008, 2009 and 2010 are written. I would like to suggest to everyone to internalize the term moderation.

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