How I Caused The Credit Crunch

By Tetsuya Ishikawa

(Published 2009, author Japanese, grew up in London and attended Eaton before reading Philosophy, Politics and Economics at Oxford University. Throughout a banking career that included Goldman Sachs, Morgan Stanley and ABN AMRO, he structured, syndicated and sold credit derivative, CDO and securitisation (including subprime) products to investors globally. He was made redundant by Morgan Stanley in May 2008)

Scapegoating bankers and CEOs was all too easy because it’s so much more gratifying to hit a person rather than an object, or even an idea. But the act of scapegoating itself was also a convenient way to avoid facing up to the reality that is uncomfortable, difficult to accept, and even disturbing.

The truth is that the system in which we operated, and not the individuals in it, was the root cause.

Ultimately, everyone inadvertently played their part in creating the credit bubble, simply by living and embracing the capitalist system we inhabit. And this was no bad thing. Everyone – from bankers to politicians, regulators, mortgage originators, rating agencies and the general public – benefited greatly.

Undeniably, the credit crunch does leave a bitter taste, but it would be short-sighted to ditch capitalism itself instead of trying to accept capitalism for what it is. It’s a bit like human evolution, which has always moved forwards through a process of trail and error but always at a cost.

But there’s one legitimate and recurring criticism of capitalism – that it lets us get carried away with a good idea, at which point it becomes very difficult to spot what is the right amount and what is too much because we are all reaping the benefits.

No one had a grand plan to create the credit crunch nor could anyone have foreseen it.

But once we get through the raft of bailouts that we have seen in the form of asset guarantee scheme and bad banks, the credit crunch will pass into the annals of history and the global economy will recover out of recession into another period of prosperity.

But as history has shown us repeatedly, we will find ourselves at some point in the future, whether it be in a decade, a few decades or even a century, unknowingly enjoying the prosperity of another bubble, only to see it burst as spectacularly as this credit crunch.