Fin Crisis: Too Late and Too Little Done in the US

“When US President-elect Barrack Obama takes office in January, the crisis will only get worse,” said Kumar, speaking at the Ahmedabad Management Association today on current financial turmoil and lessons for the future.

“The $150 billion housing tax cut package was too little and too late to halt a collapse on a much larger scale,” Kumar said, adding, “Every aspect of the financial sector has been dragged into the financial turmoil.”

“Over the past two decades, financial markets in the US have been deregulated under the leadership of Alan Greenspan when he believed markets would stabilize themselves, but in a recent statement Greenspan admitted he had been wrong for 16 years.” , Kumar said while citing a US Daily leader.

That deregulation led to the collapse of Lehman Brothers, Bear Stern and other troubled companies, he added. “The government has intervened, the crisis has slowed down, but there is now a crisis of confidence among banks and that should not be shaken at all,” he added .

The US economy has thrived on borrowed funds, leaving post-crisis countries like Japan, China, Iceland, Ukraine and others in deep trouble. China is finding ways to move away from the dollar after corporate profits started falling and showing signs of a recession, Arun Kumar said.

Now, due to a lack of trust, protectionism has crept into the economy, which is also dangerous, he warned. When US President-elect Barrack Obama takes office, he would prioritize job creation in sectors such as BPO and call centers, Kumar said, adding that the US has lost 1.5 billion jobs in the past.

So at this historic turning point, what is needed is a turnkey re-architecture for the $600 trillion financial sector, he added.

Against the backdrop of such a scenario, the G-20 initiative is important and comprehensive coordination between governments, including India’s, should be developed to get through it, Kumar added.