Executive Interviews: Interview with Bala V Balachandran on Government and Business
December 2009 - By Dr. Nagendra V Chowdary

Bala V Balachandran
Founder anf Honorary Dean of Great Lakes Inistitute of Management

1. Greed, not only on the part of investment bankers and brokers but also the main street, who, knowing fully well that they don’t have net cash flows or disposable income, falsified the accounts to reflect inflated cash flows (could be deemed fraud).

2. Too many middle men who made money at every stage with a booked revenue but not a cash inflow.

3. Too many financial instruments probably created by Mathematicians of PhD type without understanding the full impact of such insturments.

4. Too many officials who had incentives where they viewed incentives as greed and took the bonus without a real profit but a reported profit.

5. Too many lobbyists who had an agenda and an axe to grind.

6. Regulators who were complacent.

7. Fundamentals of finance out shadowed by half-baked freakanomics;

• It is generally believed that globalization is all about the interplay between 4Cs – Credit markets, Capital markets, Currency markets and Commodity markets. Was the imbalance created between these four markets in some way responsible for the financial crisis?
  Not only was there an imbalance among these four C’s and their markets, but the risks of the multiway transaction traffic was not clearly understood by all participants. The only question every one had was, ‘can I pass my risk to another and not face the axe?’ credit markets were abundant with irrational rationales; capital markets had too many market makers in a fake way; currency markets were at different extremes and risks; commodity markets were appearing to be customized markets because of the differences in the packages; The main thing is there is no one person/authority who is responsible for the combined actions of the 4C’s and each one had their own tunnel vision and the greed was all pervasive. The crux is that in such highly interdependent scenarios, to function independently can kill all.

• Who do you think should squarely be blamed for getting the world into such a catastrophic mess – the Wall Street firms with their insatiable desire for “derived” returns, or the regulators or the governments? What was it about the regulatory framework that contributed to the crisis?
  Everyone has to be collectively blamed. If there is no one to watch you and there is money on the ground to be taken, even though it is not yours, why not take it? Where are the virtues of integrity, honesty and transparency and responsibility – we rarely see them in business these days. Right from the actual perpetrators to the end-user and even the innocent bystanders who do not raise an objection, but with their silence have allowed the atrocities to continue are also equally to blame.

• A large section of people believe that the crisis was allowed to become bigger because of policy makers’ (both at the companies and the government) indecision. And the full blown crisis is just a price for indecisive governments and indifferent companies, the argument goes. Do you see any merit in this argument?
  It is not just the government and policy maker. Who are they? they are you and I or my brother-in-law or sister-in-law who was educated in a System of 220 Million. The people also went along with it, exploited and leveraged the situation to their advantage. Now that the bottom has fallen out, it is always easier to pass on the blame to the bigger authorities and completely wash one’s hands form the responsibility. The indecision of the policy maker or the government who had a short time horizon and may definitely be true, but one must remember that after all people don’t ‘cast’ their votes; but vote for their castes, caste in a generic meaning encompasses your friends and relatives;