At Davos, sometimes sorry is the hardest word
Posted on: January 30, 2009
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By BRADLEY S. KLAPPER, Associated Press Writer- Thu Jan 29, 4:43 pm ET
DAVOS, Switzerland – At Davos, it seems, sorry is the hardest word.
Amid the profound pain of the financial meltdown enveloping the globe, this week’s World Economic Forum might have been expected to feature apologies – even a massive mea culpa from the movers and shakers of the financial community that created the crisis.
There have been plenty of excuses, recriminations, hand-wringing and analysis. But scant few have owned up to the pervasive effects of bad business decisions that cost hundreds of thousands of jobs and brought the world economy to its knees.
“There’s a tremendous arrogance about the whole process,” Nobel Prize-winning economist Joseph Stiglitz told The Associated Press. The top bankers “think that it just happened, that it was nobody’s fault. But they should feel sorry.”
Meanwhile, its primarily midlevel banking officials who are now getting the boot.
Stiglitz said they aren’t to blame. “The senior people – the ones who went to Congress and lobbied for less regulation – they should take responsibility,” he said.
Lord Nicholas Stern, among Britain’s most influential economists, agreed that captains of industry and high-flying business tycoons have not been humbled or even accepted their role in the meltdown. Nor have they recognized the culpability of an unsustainable economic system they prospered under for so long.
“There’s some apologetic gestures. It’s not zero, but I will say it is embarrassingly small,” Stern said.
Many of the businessmen most tainted by the collapse of global banks and record industry losses have skipped this year’s forum. Those who came have taken part in numerous debates about the current downturn – the focus of a sober gathering that lost much of the party atmosphere and lavishness of previous years, even if private jet and helicopter use were expected to climb from 2008.
Stephen Green, chairman of financial services titan HSBC Holdings PLC, did attend – his presence noted by a TV journalist at the opening news conference.
Green managed an uneasy smile, saying later: “The banking sector has not covered itself in glory. It has made mistakes.”
Some businessmen have blamed poor regulation, arguing that authorities were at fault for permitting bankers and investors to run amok in a world of financial lawlessness. Others have cited spendthrift American consumers for indebting themselves beyond repair. Still others blame the generous, bailout-giving governments of today for their policies a decade ago.
In offering a response to the crisis, Stephen Schwarzman, chairman and CEO of The Blackstone Group LP, even went so far as to suggest less government control of the financial sector was needed.
Schwarzman urged lower capital ratios, meaning banks would be allowed to lend more of the money they are currently required to store away to cover losses. Blackstone Group, one of the world’s largest private-equity funds, reported third-quarter losses of $340.3 million as the global credit crisis eroded the value of companies it controls and locked up the lending it counts on to fund deals.
The suggestion for less regulation was greeted with derision by economists such as the University of Berkeley’s Laura Tyson, who say such policies reek of the riskiness that helped push banks into the crisis they now find themselves in.
Self regulation of financial institutions has not worked in the U.S., said Tyson, who was economic adviser to the Clinton administration.
It’s true that a simple “sorry” for mistakes or misjudgments would not reverse the economic slide. But it still might be appreciated by the many taxpayers who are now propping up their countries’ economies.
The CEO of Swiss insurer Zurich Financial Services AG was a rare exception.
“We didn’t deliver on what we promised and brought (people) to the state that we’re in,” James Schiro said. “That’s the sense of loss of trust, loss of credibility and loss of reputation.”
Schiro – whose company’s profits crashed by 90 percent in the third quarter last year after write-downs of $1.1 billion due to the financial crisis and a costly hurricane season – added that business and government needed to face up to their shortcomings.
“We all have to say ‘We apologize,'” he said. “We can spend a lot of time looking at this process, but I think we have to look forward and say what are the solutions.”
That was far from universally endorsed, however, even by companies far from the center of the storm.
Chad Hurley, the co-founder and CEO of YouTube, said the Davos forum was about getting down to business.
“I don’t think now is the time to sit around and apologize,” he said.
But Hurley said he also understood the public’s anxiety about how its money was being spent by businesses that have lost so much. Companies needed to act wisely, he said.
“It’s hard to see what they’re doing internally, to see how they’re using public funds,” he said. “The public, of course, doesn’t like it when a guy buys a new jet with government money.”
Billionaire and former Republican presidential candidate Steve Forbes said those responsible for the crisis will soon be sorry, even if they don’t say it here in the Swiss Alps.
“I think Davos is for problem-solving,” he said. “The heartfelt apologies will come when some individuals are brought before a court of law.”
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