One year after Lehman

It is one year since the US bank Lehman Brothers went bankrupt, causing turmoil in financial markets. We look at media comment on the crisis, as well as the American response to it. We also look at the German election campaign.

More work needed

Loopholes in Barack Obama’s proposed regulation of the US financial system could see risky speculation continuing in the derivatives market, which was a major cause of the financial crisis, writes The New York Times.

… The basic flaw in [Obama’s] plan is that it splits the derivatives market in two. Standardized derivative contracts would be traded on regulated exchanges. Customized contracts would continue to be privately traded — which could open the door to some of the same below-the-radar transactions that have already proved so disastrous. Beyond an odd contract here or there, derivatives should be standardized and exchange traded, period. …

Time to grow up

Wall Street and the City survived the financial crisis thanks to state aid. Now it is time for them to be weaned, writes The Economist.

… Lehman aside, no big firms have been allowed to fail (as they would have done, unaided). … [T]he implicit assumption will linger that banks will always be bailed out. This is the core problem. There are two possible responses to it: regulate banks to try to make them safer, and attempt to limit the implicit guarantee. Both approaches are now needed.

A step behind

Frank-Walter Steinmeier, the SPD vice chancellor of Germany, does not offer any convincing alternatives to Angela Merkel, writes the Financial Times.

… Mrs Merkel has fought a canny campaign, exploiting her considerable personal popularity and avoiding any identification with the sort of outspoken economic liberalism that lost her a clear victory in 2005. ... Frank-Walter Steinmeier ... lacks the same common touch. ... He is threatened by the rise of the left eroding his natural political base. He can neither blame the outgoing government for mismanagement, nor offer a reassuring alternative. …