When it comes to making the financial system proof against another Lehman, every day seems to bring further proof that we do not know what we thought we knew. AFP PHOTO/Nicholas ROBERTS
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For anyone in the financial world, time is divided into Before Lehman and After Lehman.Over the past 10 years, banks globally have underperformed the rest of the market by about 50 per cent, according to MSCI.Post-crisis financial reforms, forcing big banks to hold far more capital as a cushion and barring them from risking depositors' capital by trading on their own account, have combined with low interest rates – which make it harder to make a profit – to make banking duller and less profitable, albeit less risky.After the likes of Goldman Sachs, JPMorgan and HSBC, it is the turn of Wells Fargo, which became the world's biggest bank by market value post-crisis thanks to a focus on commercial banking and a fierce sales-driven culture.Post-crisis reforms may have robbed the Federal Reserve of precisely the powers it will need to avert the next Lehman.That led short-term funding markets on which banks relied for funding and which paid company payrolls, to dry up as trust evaporated.
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