Managerial action and financial crisis

• Autorzy: Horsch A.

Warianty tytułu

PL

Działania kierownicze i kryzys finansowy

• Języki publikacji: EN

Abstrakty

EN

Much has been written about the origins and contagious processes that led to the subprime crisis of 2007 first and to the financial crisis thereafter that characterize financial markets ever since. This retrospective is designed to illustrate that it has been human action in the very entrepreneurial or managerial sense that has caused the financial crisis to emanate and spread. From this viewpoint, responsible actors can be identified not only within financial intermediaries, but as bureaucratic and political entrepreneurs within public institutions as well.

PL

Wiele już napisano na temat pochodzenia procesów, które doprowadziły do kryzysu typu sub-prime w roku 2007, i kryzysu późniejszego którego skutki do tej pory są odczuwalne na rynkach finansowych. Przedstawiona w niniejszym artykule retrospektywa została zaprojektowana w celu zilustrowania iż przyczyną kryzysów było działanie człowieka bardzo przedsiębiorczego lub na stanowisku kierowniczym, spowodował on kryzys finansowy aby móc się dalej rozwijać i prowadzić działania. Z tego punktu widzenia, podmiotami odpowiedzialnymi są nie tylko pośrednicy ale także biurokraci czy polityczni przedsiębiorcy w instytucjach publicznych.

Słowa kluczowe

EN

human action; financial crisis; financial institution

PL

działalność ludzka; kryzys finansowy; instytucja finansowa

• Wydawca: Czestochowa University of Technology
• Czasopismo: Polish Journal of Management Studies
• Rocznik: 2012
• Tom: Vol. 5
• Strony: 7--33
• Opis fizyczny: Bibliogr. 73 poz., rys.

Twórcy

autor

Horsch A.

• University of Technology Bergakademie Freiberg, Germany, Chair of Investment and Finance,

Bibliografia

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• [57] Italics added by author. Von Mises had already developed this view in the German predecessor of “Human Action”; see Von Mises, 1940, pp. 245-250, especially p. 246: “If in economic science we speak of entrepreneurs, we do not mean individuals, […] but a function […]. We separate and personify this function by speaking of the entrepreneur.” (translated by author).
• [58] The works of Von Mises’ disciple Israel Kirzner stand as seminal on the meaning of alertness, see also ibid., pp. 141-142, 148-151. For a detailed appraisal, see also High, 1990, pp. 52-54.
• [59] Besides this pragmatic definition of institutions, it has to be admitted that groundbreaking publications define them as rules only and organizations as a different type of being, see North, 1990, pp. 4-5.
• [60] See Fischback Et Al., 2011, for a recent evaluation of federal responses to the crisis of the Elary 1930s, and Sellon/Van Nahmen, 1988, for a short history of these GSEs. On their recent domination of the U.S. mortgage market, see Degennaro, 2008, and also SAMUEL, 2009, pp. 251-252.
• [61] This interconnection represents a repeated pattern: On the meaning of the crisis of 1929 and its regulatory consequences for the S & L debacle of the 1990s, see White, 2004. In brief on further “unintended consequences” of regulations subsequent to the 1929 crisis, see Hahn/Passell, 2008; and also Benston, 1998, pp. 67-68.
• [62] See, e.g., Frankel, 2006, on US housing finance in the 21st century. On the meaning of tax law and GSEs, see also Ellis, 2008, pp. 17-22.
• [63] See, at length, Allen/Gale, 2000. Upon the current crisis, see also Longstaff, 2010, pp. 437-438 (further references); Allen/Carletti, 2008, pp. 8-10. A more sceptical point of view shows Benston, 1998, pp. 36-43.
• [64] Particularly on housing bubbles, see Case/Shiller, 2003, pp. 299-300; also Baker, 2006; Shiller, 2006. More general and theoretical, see Sheinkman/Xiong, 2003, esp. pp. 1184-1186.
• [65] See, e.g., Goodhart, 2008b, p. 355. Remarkably, this index is named after Robert J. Shiller, protagonist of behavioral finance, who after (he forecasted) the dotcom-crisis began to frown at this very development of US home prices, see Case/Shiller, 2003, especially pp. 303-304 on the index’ history. Unfortunately, one characteristic of a bubble is that early warnings are ignored.
• [66] On the problems of defining subprime properly as well as on the fact that “it was not just subprime”, see Ellis, 2008, pp. 13-15. See also Demyanyk/Van Hemert, 2011, p. 1853; Frankel, 2006.
• [67] See Frankel, 2006, p. 77, who states that the “key initial condition was the existence of institutions with a recognised capacity to invest in mortgage pools and structured finance securities”. On this process as a “moral hazard chain of behaviour”, see also SamueL, 2009, pp. 253-254; Longstaff, 2010, p. 439. See also Ellis, 2008, pp. 21-22; and - extensively - Purnanandam, 2011.
• [68] Seminal theory work on the raison d’etre and effects of “information gathering agencies” has been conducted by Millon/Thakor, 1984. See also Greenbaum/Thakor, 2007, pp. 39-76, on solutions of informational problems by different types of (financial) intermediaries. Regarding credit rating institutions, they definitely should be called firms instead of agencies from an economic point of view. The latter expression serves the illusion of a governmental or otherwise non-profit institution, Chile rating firms are owned and led by entrepreneurs and managers aiming at profits. On their role prior to the financial crisis, see Goodhart, 2008a, pp. 337-338.
• [69] See Degennaro, 2008, p. 20; also Greenbaum/Thakor, 2007, pp. 346-347; Frankel, 2006, p. 67, on the “dominant role of the government-sponsored housing finance agencies”.
• [70] On the meaning of this lack of transparency for the crisis’ process, see e.g. Adelson/Jacob, 2008, pp. 14-17; Chick, 2008, pp. 120-121; Eichengreen, 2008, p. 22; Rudolph/Scholz, 2008, p. 16. In the case of MBS, especially the uncertainty of cash-flows due to premature repayment was crucial; see Degennaro, 2008, p. 21.
• [71] On further statistical information, see e.g. Longstaff, 2010; Mayer/Pence/Sherlund, 2009, pp. 29- 35; Adelson/Jacob, 2008, pp. 14-16.
• [72] On top of the financial market developments described, the beginning of the general economic slowdown added to the evolution of the crisis, as especially unemployment would impair subprimeborrowers’ ability to pay. On unemployment and further macroeconomic factors, see Mayer/Pence/Sherlund, 2009, pp. 44-47; also Demyanyk/Van Hemert, 2011, p. 1864; Samuel, 2009, p. 242.
• [73] This first autumnal approach has to be distinguished from the original regulatory “Paulson Plan” of the Department of the Treasury, see Paulson, 2008. For an early analysis of this concept, see Samuel, 2009, pp. 243-247.