Cross-currents in the gale
The Financial Express Posted online: Wednesday, March 19, 2008 at 2326 hrs IST
Your article (‘Surviving the subprime gale’, Mar 19) provided a specious analysis of the crisis. The statistics are fine, but the prescription of opening more windows is ill-advised. We need to determine how many and how far to open. The suprime mess in the US was the result of poor regulation, refusal to recognise the crisis early and, of course, corporate irresponsibility. The article concedes that public sector banks are awaiting NPAs and there could be more in the crash than meets the eye. We need to learn from others’ mistakes. The 1997 East Asian crisis was triggered by a similar property bubble burst, excessive dependence on short-term foreign capital and hasty financial liberalisation. Common sense dictates that things too good to be true are not. The informed and uninformed alike chase the Sensex or sumptuous financial products without applying conventional wisdom. The government’s or regulators’ action is always corrective, never preventive. Yet, it is these so-called “autonomous” banks that we turn to for interest rate relief to help the economy.
—Subhashree Kishore, New Delhi