“The curse of financial crises tends to repeat every third of a century. The new generation does not remember what happened, why it happened, and how to prevent it.”
Throughout this century, Spanish society has gone through three (and some more) upheavals with negative consequences. First, the financial crisis of 2008 (the price of which we are still paying), then the pandemic (which is already forgotten), and more recently the DANA over Valencia. All three are black swans or grey rhinos that should have prompted reflection, analysis, and prevention. In summary, to learn from mistakes. This has not happened; we have not even reached the analysis phase, let alone the prevention phase. The impact of the DANA in Valencia was foreseeable (although unlikely), but the preventive measures that were announced and postponed failed. One cannot cry over spilled milk, but one can insist on doing what is necessary to prevent it from happening again. However, the political-party confrontation obscures the catastrophe and distances preventive measures from another catastrophe. A similar situation occurred with the pandemic (less foreseeable), for which not even a diagnosis and critical analysis of what was done or not done has taken place. Only the complaints about the abandonment of the elderly in the residences of Madrid remain. We have also not learned how to handle another similar case.
Now, let us address the financial crisis of 2008, which was financial and then economic, social, and political, and whose effects we continue to suffer. The curse of financial crises tends to repeat every third of a century. The new generation does not remember what happened, why it happened, and how to prevent it. Jorge Pérez, who was head of accounting regulation at the Bank of Spain, has published a brief and substantial book titled “Two Extravagant Stories. Banco Popular and Bankia” with Marcial Pons, in which he coldly analyses the failure of both entities that, at the end of the 20th century, were among the most successful in Europe. How was their debacle possible? It is an analysis that should have been conducted thoroughly to avoid repetitions. The failure was a combination of incompetence, recklessness, machinations, cowardice… of the very managers of both entities and others involved (auditors, supervisors, authorities from two governments of different political stripes, and analysts).
The author writes in this issue an article that deserves to be taken into account at this time. He questions the opportunity to increase the size of banks to the point of making them too big (and important) to be rescued with public funds. That is what happened with the extravagances of Popular and Bankia, whose passion for growth and escape led them to disaster. Prevention failed, in addition to the prior malpractice. The governments that did not understand the problem because the homework was not done and they were pretending, groping in the dark, and fattening the hole failed. They say it is part of human nature not to learn from mistakes, to stumble over the same stones. This fatal destiny cannot be inevitable, although the noisy political conversation that overwhelms us today may provide the best breeding ground for forgetting what is important and getting bogged down in the anecdotal. Jorge Pérez rescues in his book a phrase from Draghi that deserves to be remembered: “When we face the dramatic need for recapitalisation, if we look back, the reaction of the supervisors is to underestimate the problem, then they come out with a first evaluation, a second, a third… It is the worst possible way of doing things, because they end up doing the right thing, but at the highest price and cost.” ♦