UNDERNEWS

Undernews is the online report of the Progressive Review, edited by Sam Smith, who has covered Washington during all or part of one quarter of America's presidencies and edited alternative journals since 1964. The Review has been on the web since 1995. See main page for full contents

February 10, 2009

DELUSIONAL IN DAVOS

Federico Fubini, Foreign Policy - Publicly, the discourse is all about the dangers of "false market assumptions" and the now-infamous "financial engineering." (I seem to remember it being called "financial innovation" last year.) But offstage, top bankers, private equity bosses, and hedge fund stars keep chitchatting and socializing, just as if banks had not had $1 trillion write-downs, the financial markets had not lost $25 trillion, and up to 30 million jobs were not at risk around the world.

To achieve this state of mind, any human being probably needs to construct a formidable mental shield. A survey I personally conducted at Davos this year of 60 top central bankers, financial market regulators, fund managers, and industry opinion-makers gives an idea of what this shield looks like.

When participants were asked whether they think they have done something in their career which "might have contributed, even in a minor way, to the financial crisis," 63.5 percent opted for a clear "no"; 31.5 percent went for a "yes," often adding in the same breath that nobody in the industry can honestly claim otherwise; and 5 percent said "maybe."

The "yes" people were then asked to explain what triggered their wrong decisions. They had three options: "too much optimism" (68.7 percent), "I felt I had to keep dancing while the music was playing" (31.3 percent), or "greed" (0 percent).

David Rubenstein, cofounder and managing director of the Carlyle Group, expressed surprise at the results. "How strange," he said. "I thought 100 percent of them would say they had nothing to do with it.". . .

For all the talk of the more "somber" mood at this year's event, there were about 100 more private jet movements at the Zurich airport last week than during last year's event. I'm not sure if the irony was lost on the organizers who handed out pedometers to forum participants, to encourage them to walk and reduce their carbon footprint.

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