Financial Crisis – What Happened

The CornerHouse

For the past couple of years, The Corner House and its colleagues have been trying to understand the impacts of the new finance on the ground — for instance, on communities affected by mining or plantations — and to analyse what difference it might make to solidarity strategies with affected communities: Is capital just capital, whether it comes from hedge funds, private equity, banks or the state? Or does the very structure of this new finance create new challenges?

Our work on this is still unfolding, but with the financial landscape changing by the day, we thought we should share with you now our analysis to date.

So we have posted on our website two papers:

-one exploring the ‘shadow banking system’
-the other private equity.

Because events are still unfolding so rapidly, however, we are posting them as ‘works in progress’ that we aim to update as soon as we can.

Within the next few weeks, we hope to post other papers on sovereign wealth funds, hedge funds, and the liberalisation of the banking and financial system that enabled the crisis to happen.

We hope you find them the papers useful. Your comments and feedback are always welcome.

best wishes from all at The Corner House

A (Crumbling) Wall of Money Financial Bricolage, Derivatives and Power
by Nicholas Hildyard
paper | published October 2008 | summary | PDF

Financial entrepreneurs created a ‘shadow banking system’ over the past 30 years to circumvent regulation and to offload risk onto others, relying on ‘derivatives’ and ‘securitisation’. They generated easy credit that fuelled a boom in corporate mergers and acquisitions across the United States and Europe, and that enabled companies involved in mining, biofuels, private health care, water supply, infrastructure and forestry to expand their activities signficantly. When the pyramid of deals came tumbling down, however, the public had to bear the costs.

Taking it Private Consequences of the Global Growth of Private Equity
by Kavaljit Singh
paper | published September 2008 | summary | PDF

Private equity has become an integral part of the world’s financial system, creating a new type of corporate conglomerate that is reshaping the way business is conducted. It poses new challenges to labour unions, NGOs and community groups because of its influence on taxation policy, corporate governance, labour rights and public services. These challenges are especially clear in Asia, which private equity firms are targeting since the “credit crunch” took hold. Private equity’s vulnerabilities, however, may provide opportunities to address public concerns.