Here’s a joke of almost subprime proportions.

The Financial Times reported this week that:

London’s efforts to challenge New York as the leading financial centre will receive a boost on Tuesday with a new study by the World Economic Forum showing that the UK ranks alongside the US as the world’s most developed financial system.

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The US and the UK come out as joint leaders of the WEF’s first ‘financial development index’, followed by Germany, Japan, Canada and France.” It is not April 1, so keep on reading.

According to the FT, the financial development index “is an attempt to measure the health of the financial systems of 52 countries by looking at factors ranging from the stability of the banking sector to the soundness of the regulatory and political environment.”

The FT said, “WEF officials say they will present the report, which was led by Nouriel Roubini, [who is one of the great bears of the credit crunch] a New York university professor, to regulators and bankers around the world over the coming months. They believe the study can help policymakers and industry leaders to improve national financial systems at a time of severe strain by highlighting their respective strengths and weaknesses.”

So is this a very sick joke, or are the folk at the WEF acting in their now famous blinkered fashion? Remember how the WEF has belatedly discovered green issues, climate change and third world economic despair?

The WEF is known of course for the yearly talkfest where holidays are enjoyed amid the snows of Switzerland. A lot of Swiss people work for it. They are not noted for having a rip-snorting sense of humour.

But then the Swiss are very upset at how the woes afflicting UBS and to a lesser extent, Credit Suisse, have the potential to wreck the economy. That’s why its regulators are changing the rules to control investment banks and why the central bank is co-operating with the Fed and the ECB to keep funding the banks on a daily basis.

The reality is there are no strengths in London and New York where regulators and participants in the financial sectors share responsibility for the greatest financial crisis since the depression.

So the world’s two major financial centres are the two financial centres that brought us the subprime mortgage crisis, the tanking US housing sector and economy, credit mysteries called CDOs (collaterallised debt obligations) and all other recent disasters such as North Rock bailout and nationalisation, Bear Stearns, Fannie Mae and Freddie Mac, losses at Lehman Bros, Merrill Lynch, Goldman Sachs, JPMorgan, Morgan Stanley, AIG and Citigroup, to mention just a few. There’s also more than half a trillion dollars in overall writedowns and losses, more than $US350 billion in new capital injections, plus the loss of untold market value around the world.

Oh, I forgot to single out the credit crunch … but so did the WEF.

Almost subprime was its avoidance of the family of hulking apes in the back of the trading rooms in London and New York. Didn’t anyone tell the WEF that the American banking system is technically broke at the moment, dependant on the Government and the Fed for the finance to manage day to day and medium term activities?

Did no one at the Financial Times appreciate the irony of this study being issued two days after the bailout of Fannie Mae and Freddie Mac at a potential cost of $US200 billion or more?

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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