Tuesday, October 07, 2008

The truth will out … but not here

In what will most probably be highly disputed testimony, Martin Sullivan (pictured), former chief executive of AIG, the collapsed insurance giant that had to be rescued by the US government, is saying that, "above all … mark-to-market accounting played a central role in the company's rapid deterioration."

That is according to The Financial Times which records written testimony released by Sullivan which he was set to deliver to a Congressional inquiry on the collapse.

Whatever comes out of the inquiry, the very fact of Sullivan's testimony adds to the growing weight of evidence that the mark-to-market rule has added significantly to the depth of the current crisis. And, since it also applies in equal measure here, it cannot be said that the UK or other European financial institutions have escaped the problem.

That the British media has almost entirely skirted the issue, leaving the public entirely uninformed, is an indictment of that industry. If the financial services industry had behaved as badly, we would have all been bankrupt years ago.

What is also so very instructive is that, while the Americans have gone about suspending mark to market after a massive public and media discussion, and via an instruction from Congress after a heated debate, we see the same action being taken in the EU by a committee in Luxembourg behind closed doors, with no public debate and without the issue even being put on the published agenda.

And when the decision is made, it is scarcely reported by the same media which could not even be bothered to find out that it was on the agenda in the first place. Is it a good move? We thought so but others may disagree. But no one here has been given a serious chance to debate it and it has not even been discussed in parliament.

It is all very well complaining about the encroaching rule of Brussels but, when our own media – to say nothing of our chatterati - can only focus on our own domestic issues and insist on seeing everything through the prism of domestic politics, it is hardly surprising that the "colleagues" get away with it. And when our own MPs are not even involved in what may be a crucial decision, it says everything for the state of our democracy.

In that context, we see Conservative Home at last taking an interest in the financial crisis. What is disturbing though, is that suggested actions – including those in the comments - are framed entirely in terms of domestic actions, around familiar UK politicians. Nowhere is there any recognition that much of the action today took place not in London but in Luxembourg. It seems that it is not only the politicians who cannot see the elephant in the room.

And will the finmin meeting be raised by the leader of the opposition at PMQs tomorrow? I very much doubt it.

  • Other posts on the financial crisis here.