Five years after Lehman Brothers and the greater financial sector came crumbling down, banking experts say that the jury's still out on whether the U.S. financial system is much safer than it was then, despite the resulting investigations and stringent regulatory action to ensure that the crisis of 2008 would never happen again.
Though the debate could go either way, at the Bloomberg Markets 50 conference Tuesday in New York, a panel of current and former bank leaders and regulators said that while there have been some positive measures to protect the consumers and investors in the country's banking system, these efforts have fallen short.
What most surprises these industry leaders five years later is that virtually nobody saw the collapse coming.
"I don't really know why Americans were so surprised about the situation," said Lord Adair Turner, a senior fellow at the Institute for New Economic Thinking and former Chairman of the Financial Services Authority, United Kingdom, a role he started days after the Lehman collapse. "I think until the Lehman's weekend, people hadn't quite realized that we were about to hit a complete crisis."
As for how things have changed, Turner said the U.S. is safer, but that there are important questions that remain unanswered about further regulation.
"We don't have a clear answer to what are we going to do about the accumulation of leverage," Turner said. "The total level of debt in our economies is not going down, it's just shifting."
Taking a harsher stance on the current state of the U.S. financial system, Sallie Krawcheck, the former head of the global wealth and investment management division at Bank of America, pointed out a few lingering issues from the crisis that need to be resolved before the banking industry can be made safer.
"I do wake up at 5:30 in the morning and fret about money funds," Krawcheck said, pointing out that these financial products represent pockets of risk as there aren't regulations regarding how much capital they need to be backed by. "Didn't we learn that from the downturn?"
Krawcheck also took issue with the compensation structure at banks nowadays, saying it incentivizes risk taking, when it should be discouraging risky tactics among banking professionals.
"The issue is the structure of compensation, with more equity as a percentage," Krawcheck said. "But equity is a risk-encouraging element. These banks are rife with risk — that's their business. I do fret that we haven't really been thoughtful about compensation and how not to incentivize risk but to reduce it."
Mariah Summers is a business reporter for BuzzFeed News and is based in New York. Summers reports on hospitality, travel and real estate.
Contact Mariah Summers at email@example.com.
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