In 2000 it was the $164bn (£103bn) AOL takeover of Time Warner
in America. In 2007 it was the-then Sir Fred Goodwin's £49bn acquisition
of ABN Amro that signalled that the markets had peaked and were about
to crumble.
Every financial crisis has its totemic moment; a decision that even at the time seems to defy logic and in retrospect is seen as an act of gross stupidity. Yet it takes more than one individual banker, no matter how powerful, to make a crisis and when the historians come to chronicle the Great Recession of 2008-09 the list of guilty men and women will include more than one former knight of the realm.
Here, then, is a (far from exhaustive) list of those who might be considered most culpable – who caused, exacerbated or failed to prevent the worst downturn in the global economy since the 1930s.
A fanatical believer in the self-righting qualities of financial markets, he was the bubble king who allowed the dotcom boom of the late 1990s to get out of hand and then, when plummeting share prices pushed the economy into recession, started the whole process off again, this time in the housing market.
As chairman of the Federal Reserve, he cut interest rates and left them at rock-bottom levels for two years.
Cheap borrowing costs encouraged Americans to load up on debt to buy homes, even when they had no savings, no income and no job prospects.
These so-called sub-prime borrowers were the cannon fodder for the biggest boom-bust in US history. The housing collapse brought the global economy to its knees.
King became Bank of England governor in 2003, and while he has subsequently been one of the most pro-active central bankers with a refreshingly robust approach to the banks, the case against him is that he failed to "lean against the wind" during the economic upswing, leaving interest rates too low, and then waited too long when the economy was nosediving into its most severe postwar recession before cutting bank rate.
Under the government's tripartite system of regulation, the Old Lady was supposed to ensure developments in the City did not pose a systemic risk to the economy. It failed in that task.
His last big speech before becoming prime minister, made at the Mansion House in June 2007 just as the financial crisis was about to break, praised the bankers for their remarkable achievements and predicted "the beginning of a new golden age for the City of London". It wasn't.
Brown presided over the loss of a million manufacturing jobs and an ever-widening trade deficit while cosying up to the City. He used to quip that there were two types of chancellors: those who failed and those who got out in time. He got that one right.
After a fierce lobbying campaign, Clinton agreed to repeal the Glass-Steagall Act, which ensured a complete separation between investment and retail banks. The move heralded the coming of superbanks, huge behemoths that took in retail deposits and used them to take highly-leveraged punts in the markets.
To make matters worse, Clinton beefed up Jimmy Carter's 1977 Community Reinvestment Act to force lenders to take a more relaxed approach to disadvantaged borrowers. Liberalised banks plus millions of new sub-prime customers equalled one big problem.
In large part, responsibility for that lies with Fama, a Chicago University economics professor who in the 70s came up with the efficient markets hypothesis (EMH), which stated that financial markets price assets at their true worth based on all the publicly available information, encouraging the belief that the best thing to do was to pile in when prices were rising. Bubble-think, in other words.
The changes pushed through in the US and the UK in the 80s removed constraints on bankers, made finance more important at the expense of manufacturing and reduced union power, making it harder for employees to secure as big a share of the national economic cake as they had in previous decades.
The flipside of rising corporate profits and higher rewards for the top 1% of earners was stagnating wages for ordinary Americans and Britons, and a higher propensity to get into debt.
Paulson's big mistake was to put Freddie Mac and Fannie Mae into conservatorship, wiping out the stakes of those who had invested $20bn in the two government-backed mortgage lenders over the previous 12 months.
Unsurprisingly, there was no great rush among private investors to rescue Lehman Brothers when it ran into trouble the following week, and when the US treasury allowed the investment bank to go bust every financial institution in the world was seen as at risk.
Fred the Shred destroyed a bank; Paulson triggered the biggest economic downturn since the Great Depression.
Corbet was CEO of Standard & Poor's, the biggest of the rating agencies, and she left her post in a "long-planned" move in August 2007 just as the financial markets were shutting down.
The justification for the top-notch ratings was that the poor-quality loans would be lost in the mix, but when the crisis broke the reality was more like a food scare, in which supermarkets know there are a few dodgy ready-made meals on their shelves but must bin the lot as they are not sure which ones they are.
Gramm, who thinks Wall Street a "holy place", was the main cheerleader in Congress for financial deregulation, putting pressure on the Clinton administration to ease restrictions – not that it needed much persuading.
The fact that he had been the biggest recipient of campaign fund donations from commercial banks and in the top five for donations from Wall Street from 1989 to 2002 was, of course, entirely coincidental.
Or Stan O'Neal, whose attempts to rid Merrill Lynch of its fuddy-duddy image saddled the bank with $8bn of bad debts?
How about Andy Hornby, the whizzkid running HBOS? Or perhaps the man chosen by Gordon Brown to be HBOS's white knight – Sir Victor Blank, chairman of Lloyds?
Choose any one from a very long list.
Every financial crisis has its totemic moment; a decision that even at the time seems to defy logic and in retrospect is seen as an act of gross stupidity. Yet it takes more than one individual banker, no matter how powerful, to make a crisis and when the historians come to chronicle the Great Recession of 2008-09 the list of guilty men and women will include more than one former knight of the realm.
Here, then, is a (far from exhaustive) list of those who might be considered most culpable – who caused, exacerbated or failed to prevent the worst downturn in the global economy since the 1930s.
Alan Greenspan
Laughably given an honorary knighthood in 2002 for his "contribution to global economic stability", Greenspan's responsibility for the crash cannot be underestimated.A fanatical believer in the self-righting qualities of financial markets, he was the bubble king who allowed the dotcom boom of the late 1990s to get out of hand and then, when plummeting share prices pushed the economy into recession, started the whole process off again, this time in the housing market.
As chairman of the Federal Reserve, he cut interest rates and left them at rock-bottom levels for two years.
Cheap borrowing costs encouraged Americans to load up on debt to buy homes, even when they had no savings, no income and no job prospects.
These so-called sub-prime borrowers were the cannon fodder for the biggest boom-bust in US history. The housing collapse brought the global economy to its knees.
Sir Mervyn King
Britain was mini-me to the US in the days of grand illusion before the crash, having its debt-fuelled party where growth was concentrated in the speculative sectors of housing and finance.King became Bank of England governor in 2003, and while he has subsequently been one of the most pro-active central bankers with a refreshingly robust approach to the banks, the case against him is that he failed to "lean against the wind" during the economic upswing, leaving interest rates too low, and then waited too long when the economy was nosediving into its most severe postwar recession before cutting bank rate.
Under the government's tripartite system of regulation, the Old Lady was supposed to ensure developments in the City did not pose a systemic risk to the economy. It failed in that task.
Gordon Brown
We have abolished Tory boom and bust, Brown said repeatedly in his 10 years as chancellor of the exchequer. He hadn't.His last big speech before becoming prime minister, made at the Mansion House in June 2007 just as the financial crisis was about to break, praised the bankers for their remarkable achievements and predicted "the beginning of a new golden age for the City of London". It wasn't.
Brown presided over the loss of a million manufacturing jobs and an ever-widening trade deficit while cosying up to the City. He used to quip that there were two types of chancellors: those who failed and those who got out in time. He got that one right.
Bill Clinton
One Democratic president, Franklin Roosevelt, put a cage round Wall Street after its excesses in the 20s led to the Wall Street crash and the Great Depression. Another Democrat, Bill Clinton, gave Wall Street the cage keys.After a fierce lobbying campaign, Clinton agreed to repeal the Glass-Steagall Act, which ensured a complete separation between investment and retail banks. The move heralded the coming of superbanks, huge behemoths that took in retail deposits and used them to take highly-leveraged punts in the markets.
To make matters worse, Clinton beefed up Jimmy Carter's 1977 Community Reinvestment Act to force lenders to take a more relaxed approach to disadvantaged borrowers. Liberalised banks plus millions of new sub-prime customers equalled one big problem.
Eugene Fama
The economics profession failed to cover itself in glory in the run-up to 2007. Not only did economists fail to spot that financial institutions were loading themselves up with vast quantities of toxic sub-prime debt, most of them thought it was theoretically impossible for a crisis to happen.In large part, responsibility for that lies with Fama, a Chicago University economics professor who in the 70s came up with the efficient markets hypothesis (EMH), which stated that financial markets price assets at their true worth based on all the publicly available information, encouraging the belief that the best thing to do was to pile in when prices were rising. Bubble-think, in other words.
Ronald Reagan and Margaret Thatcher
Just as many trends in modern popular music can be traced back to the Beatles, so politics was shaped by the activities of Reagan and Thatcher, the Lennon and McCartney of deregulation, market forces and trickle-down economics.The changes pushed through in the US and the UK in the 80s removed constraints on bankers, made finance more important at the expense of manufacturing and reduced union power, making it harder for employees to secure as big a share of the national economic cake as they had in previous decades.
The flipside of rising corporate profits and higher rewards for the top 1% of earners was stagnating wages for ordinary Americans and Britons, and a higher propensity to get into debt.
Hank Paulson
The US treasury secretary in 2008, Paulson was the Sir Anthony Eden of the financial crisis. He had all the necessary credentials a Republican president would consider necessary for the job – chief executive of Goldman Sachs with an MBA from Harvard. He was considered the brightest and best of his generation. Like Eden over Suez, he was faced with a monumental challenge. And he blew it.Paulson's big mistake was to put Freddie Mac and Fannie Mae into conservatorship, wiping out the stakes of those who had invested $20bn in the two government-backed mortgage lenders over the previous 12 months.
Unsurprisingly, there was no great rush among private investors to rescue Lehman Brothers when it ran into trouble the following week, and when the US treasury allowed the investment bank to go bust every financial institution in the world was seen as at risk.
Fred the Shred destroyed a bank; Paulson triggered the biggest economic downturn since the Great Depression.
Kathleen Corbet
No rogues' gallery of the crisis would be complete without a representative of the credit rating agencies. These were the bodies that took fees from the banks while giving the top AAA rating to collateralised debt obligations, the hugely complex financial instruments that bundled together the toxic sub-prime mortgages with the sound home loans.Corbet was CEO of Standard & Poor's, the biggest of the rating agencies, and she left her post in a "long-planned" move in August 2007 just as the financial markets were shutting down.
The justification for the top-notch ratings was that the poor-quality loans would be lost in the mix, but when the crisis broke the reality was more like a food scare, in which supermarkets know there are a few dodgy ready-made meals on their shelves but must bin the lot as they are not sure which ones they are.
Phil Gramm
"Some people look at sub-prime lending and see evil," said this senator in a debate on Capitol Hill in 2001. "I look at sub-prime lending and I see the American dream in action."Gramm, who thinks Wall Street a "holy place", was the main cheerleader in Congress for financial deregulation, putting pressure on the Clinton administration to ease restrictions – not that it needed much persuading.
The fact that he had been the biggest recipient of campaign fund donations from commercial banks and in the top five for donations from Wall Street from 1989 to 2002 was, of course, entirely coincidental.
The bankers
Was it Fred Goodwin at RBS or Adam Applegarth at Northern Rock – the first UK high street bank to suffer a full-scale run on its branches since the 1860s? Was it Dick Fuld, the man in charge at Lehman Brothers when it went belly-up? Jimmy Cayne, who spent the first month of the crisis playing bridge rather than running Bear Stearns?Or Stan O'Neal, whose attempts to rid Merrill Lynch of its fuddy-duddy image saddled the bank with $8bn of bad debts?
How about Andy Hornby, the whizzkid running HBOS? Or perhaps the man chosen by Gordon Brown to be HBOS's white knight – Sir Victor Blank, chairman of Lloyds?
Choose any one from a very long list.
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