Thai Central Bank Parallels US Credit Crisis With Asia Meltdown in 1990s  | Voice of America - English
As financial markets continued to recover from the recent wave of selling, Thailand's central bank governor has recommended greater surveillance by regional central banks and the need for more policy measures in the hands of central banks to deal with similar crises in the future.
According toThailand Central Bank Governor Tarisa Watanagase, an underlyingsimilarity of the current financial crisis in the United States andAsia's financial troubles during the 1990s is poor management of thefinance and banking sectors of the economy and unsound monetarypolicies. Tarisa told a symposium of senior central bankofficials Saturday the "complexity and magnitude" of the current crisisin financial markets also raised questions whether central banks hadsufficient policy tools to deal with the turbulence. The financialmarkets, she said, had grown more complex over recent years. "Lookingat the overall picture, what is now going on in Wall Street may remindus of what happened in our region 11 years ago," said Tarisa. "At aglance, the root causes of both events are strikingly similar:investors taking excessively high risks creating asset price bubbles,against the background of lax prudential and monetary policy." Asia'sfinancial crisis swept away billions of dollars in investments andcaused a sharp contraction in economic growth. Millions of people losttheir savings and their jobs. Tarisa warned resolving the currentfinancial crisis is likely to be more difficult. "With today'sfinancial environment, however, changes in the regulatory requirements,market players, business models of financial firms, as well as economicconditions have all played a part in escalating the impact of financialturmoil through the creation of a broader and deeper financial system,"said Tarisa. Tarisa said central banks need to be prompt withpre-emptive actions, given changing market conditions. She saidpolicies need to be flexible to deal with evolving challenges, whilecentral banks should remain independent to ensure credibility. She alsocalled for greater regional cooperation among the central banks. Inthe past week central banks, led by the United States, European Union,Japan, Australia and others in South East Asia, have pumped over $200billion into fragile capital markets to ease tight credit conditionsand restore confidence. Panic swept global financial and sharemarkets after leading investment house, Lehman Brothers collapsed. TheU.S. government was also called on to mount an $85 billion rescueof troubled international insurer, AIG. The crisis raisedquestions over the U.S. financial system and the prospect of the mergerof more financial firms to remain solvent. The crisis was a result ofmassive debts in the U.S. housing sector, that led to the most severehousing recession in 80 years.