By LOUISE STORY, NEW YORK TIMES, Published: August 6, 2008
A group of Wall Street executives released a report on Wednesday that outlined how the industry failed to foresee the financial meltdown of the last year and what companies can do to improve risk management.
The 172-page report, written by chief risk officers and senior executives at banks like Lehman Brothers, Merrill Lynch and Citigroup, also provides suggestions about technical issues at the same time as it offers a bit of a mea culpa...
...In a cover letter to Treasury Secretary Henry M. Paulson Jr., the group attributed some of the crisis to human psychology:
“While this turn of events had multiple causes and contributing factors, the root cause of financial market excesses on both the upside and the downside of the cycle is collective human behavior — unbridled optimism on the upside — and fear — bordering on panic — on the downside. As History tells us in unmistakable terms, it is virtually impossible to anticipate when optimism gives rise to fear or fear gives rise to optimism. The last twelve months have been no excetion to this sobering reality.”
