A year ago, bankers were keeping low profile in their financial crisis talks, in an effort to avoid excessive media coverage. Today, the beacon that has started in the US credit market spread like wildfire throughout the entire financial world, and turned into a full-fledged economic hardship of the mankind. In an interview to Wall-Street, Dan Paul, chairman of Brokers’ Associations and vice-president at BSE, talks about the effects of the financial crisis over the capital market.
“Capitalism will change the way we see things”

Although some people were ready for a crisis, given the signs emerged by the capital market, its outburst still took many by surprise. “It’s like an earthquake where people either don’t understand what just happened or understand it and don’t know how things will settle down again”, said Dan Paul.

The managers’ greed, Dan Paul continued, was a psychological factor that paved the way for the financial crisis, because in fact, there were the very same errors of judgments that led to the Great Depressions in 1929.

“The Second World War ended the Great Depression, and I hope it will not happen the same now. The world is now more open-minded, and after all, we can say that the war in Iraq was the direct precursor to the devastating economic downturn, where billions of dollars were spent, funds of United States and of the entire world”, said the vicepresident of BSE.

Markets should not be self-regulated, Dan Paul added. In the end, the buyer’s intervention is essential, and the price is regulated by people anyway.

The end of the crisis will not change capitalism, but rather our way of thinking and discerning things. “We will see things from different standpoints, but the capitalism will remain unchanged. We are going through different times”.

A reshuffle of players in various sectors is inevitable and already perceptible in the capital market.

“The first to feel the effects are the large brokerage firms, both foreign and national ones. Some of them have already been integrated in the bank, others are still confused, and the small ones will most likely merge. Maybe some of them have extended their business too much and now they are trying to cut costs”, said Dan Paul.

The head of the brokers thinks it’s time for people to wake up from the financial crisis drama and to start taking some tangible measures.

“I think we need a wider security pool now, as investors are attracted by fixed incomes. Furthermore, this is a good solution for companies in need of liquidity and can’t borrow it from the bank. This is the positive side, companies will refocus on the stock market, as the lenders will tie the belt even tighter”, said the chairman of Brokers’ Association.

“The time of strategic investor is long gone. The state must lead privatizations via stock market only”

Beyond the measures that the capital market will make to raise popularity of the stock exchange, Dan Paul says Romanian capital market needs the backing of the government.

“We don’t need a pouch of money from the government, there are no systemic problems. They only have to grasp that the stock exchange is a very transparent mechanism of economy, and that they have to conduct privatizations only via the stock exchange”, said Paul.

He thinks there are many investors keen to buy treasury certificates or state securities now, and it would be very helpful if the government didn’t overtax the stock exchange instead of helping it.

“For example, the Austrian politicians understood that if the state carries privatizations only via stock market, it will abolish bribery. Everything is more transparent, prices will be fair, and investors become the fiscal agents of the state, who go to general meetings, watch the balance and pay taxes. We hope that the Romanian state will eventually understand this, especially if the times of strategic investors are long gone”, he said.

As for the evolution of the crisis, Paul thinks no sensational, breath-taking events are in sight. “We will overcome these tough times easily, and I am sure that the stock market will anticipate the exit from the gloomy period, which I hope to be in second half of the year”.

“It is too much (benchmark lending rate), there is a wide gap between the active and passive interest and with the lending activity in deadlock I don’t know how it will be covered. Furthermore, the currency exchange rate is unfavorable and the signs sent out should be better weighed. I think the National Bank should intervene in the currency market only in critical moments, and without a prior announcement”, said the chairman of BSE.
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