After carrying the battles cars of the worst banking crisis
since the Great Depression and the hubris that preceded it,
bankers, investors and policy makers alike who gathered in Davos,
Switzerland, last week assigned a tepid welcome to signs of
recovery in the world economy and the endurance of the Eurozone.
Indeed, "Optimism, but with a sober tone," was the message conveyed
by Bank of America Corp (
) Chief Executive Officer Brian T. Moynihan who characterized the
mood pervading the World Economic Forum's annual meeting, even as
investors celebrated the Standard & Poor's 500 Index piercing
the 1,500 threshold for the first time since 2007 - truly the year
of infamy for equities.
"The mood in Davos was totally different when stocks last reached
that peak." noted Harvard University economics professor Kenneth
Rogoff. This year, executives from Deutsche Bank AG and the Goldman
Sachs were quick to couple upbeat assessments with warnings of
economies remaining fragility, also with the analysis being prone
to policy error - some bankers even worried that credit bubbles may
be coalescing as central banks churn out cash.
"The crisis gave them a bit of an inoculation psychologically
because they can see what can go wrong," Rogoff, a former
International Monetary Fund chief economist, noted in the aftermath
of a January 26 private session with IMF Managing Director
Christine Lagarde and Deutsche Bank co-Chief Executive Officer
Anshu Jain. "They're not as euphoric as they'd usually be when the
stock market went up as much as it has."
Such humility was certainly in short supply in Davos on the eve of
the credit crisis that engulfed markets in 2008. The year before,
John Thain, then CEO of NYSE Group Inc., said "the financial
markets, the world economies are all actually in quite good shape."
Josef Ackermann, Deutsche Bank's CEO at the time, said investment
banks "have a very good future."
After being stung by the subsequent collapse of Lehman Brothers
Holdings Inc., more than USD $1.0 trillion in bank losses, the
stigma of taxpayer-funded bailouts and a worldwide recession,
leaders of the largest banks displayed little bravado in the Swiss
resort this year, even as markets cheered improving economic growth
in the U.S. and China and reflected an ebbing risk that a
euro-member country might abandon the currency.