"Current Global 'Economic Tsunami': Origins, Causes, Lessons and Remedies"

Presented by: Dr S M Solaiman

Wednesday, 12 August 2009

About the speaker:

Dr S M Solaiman  is Senior Lecturer at the Faculty of Law, University of Wollongong, and formerly Professor and Dean, Faculty of Law, Islamic University, Bangladesh. He also worked as Professor of Business Law at American International University Bangladesh.

Abstract:

It is all about money which makes people unreasonable. An unholy merger of perverseness almost at every level of financial markets gave birth to the present economic catastrophe in the United States that has trembled up the global economy taking advantage of the existing economic globalisation. Clearly, the current financial crisis resulted from an irrational credit bubble and its inevitable bust. Steady global economic growth over the past decade made almost all stakeholders of financial and housing markets oblivious of the great depression of the 1930s and its potential recurrence. Overconfidence, selfishness and moral hazards are believed to be the three main culprits behind this tsunami. As they are exposed in the marketplace over the years, financial markets witnessed disregard for the consequences of:  irresponsible lending, voracity of both lenders and borrowers to be affluent overnight, regulatory laxity seemingly aimed at arresting arbitrageurs, moral hazards of loan originators to secure selfish gains, poor underwriting and credit rating practices to overpower competitors are arguably the most notable factors causing this hardship of the world community. Having recognised the benefits of the free market economy for its significant contribution towards the development of global economy, time is ripe to learn a lesson that deregulation and self-regulation cannot be substitute for government regulation. Admittedly, humans are generally selfish and ambitious about money with various degrees, for which financial laws across the globe intend to regulate the cupidity of few to protect the credulity of many. It is a historical truth that human culpability cannot be eliminated entirely, but can be regulated endurably by an effective regulatory regime. The regulatory frameworks currently in place prove ineffective warranting a revisit of the parameter of financial regulation. This study reasonably recognises the risk of overregulation, and equally appreciates the need for effective regulation of financial markets at both domestic and international levels. It concludes with recommendations for reducing the amount of disclosure, widening the scope of regulation and strengthening the watchdog of financial markets.

For further information contact:

Dr Nadirsyah Hosen
Lecturer
Faculty of Law
University of Wollongong
NSW Australia
Email: hosen@uow.edu.au
Phone: +61 2 4221 4192
Fax: +61 2 4221 3188