IIM Ahmedabad Celebrates Confluence 2009

IIM Ahmedabad Celebrates Confluence 2009

He also held that in the good times, there was a lack of regulatory framework to prevent the accumulation of leverage beyond what was sustainable. Firms continued to increase leverage in the hope that asset prices would increase indefinitely.

Mr. Bhave also suggested that while equity markets witnessed huge drops in value, they still continued to maintain liquidity and hence what really set off the bust was the lack of liquidity in OTC markets. He hence believes that OTC instruments also need to be brought under a regulatory framework because this market, according to him, shall always face similar situations during bearish times due to lack of trust based on high counterparty risks. Mr. Bhave also mentioned that it would soon be time when India's policy-makers would no longer have the luxury of waiting for other markets to take actions in difficult situations and then implement those in the Indian markets.

Ms. Shyamala Gopinath, Deputy Governor of RBI, detailed the five Rs. important for an economy in the post-crisis scenario which include: Recovery, rescue, retreat, regulation and restructuring. Ms. Gopinath talked about the regulation aspect and continued the line of thought set by Mr. Bhave. She also stressed the importance of bringing OTC instruments under a regulatory framework, although she went one step ahead and suggested that such policies should not really impact end users who use such instruments for hedging against business risks but only buyers that speculate on their account. She concluded by reigniting the debate on whether in the post-crisis world regulators need to have an absolute rule-based approach or be more discretionary in their outlooks.

Mr. Paranjoy Guha Thakurta, Journalist and Educator, brought in a number of colorful popular culture references to highlight the role of complex financial instruments traded irresponsibly in bringing about the crisis. He stressed the fact that a number of leading economists, analysts and policy makers were unable to identify the immediacy of the problems in the system. He talked about the dichotomy of the capitalist and socialist ideologies dominating the two major powers in the world and then went on to question whether the differences are relevant any more when capitalist governments become majority stake holders in the largest private corporations. Building on this Mr. Thakurta summarized that, as John Keynes suggested, markets do not have a self correcting mechanism in times of dire crises and the government has to intervene. Concluding with a quote from Dickens' Tale of Two Cities, "it was the age of wisdom, it was the age of foolishness", Mr. Thakurta brought home the impact of the contradictions that have become an identifying icon of the present financial crisis.

Contributed by -
M. Arun,
Coordinator,
Media Relations,
Confluence 2009,
Indian Institute of Management, Ahmedabad.

MBA Alumni \| MBA Students \| MBA Aspirants \| MBA Forums