Silence of Centre

I am quiet surprised with unfolding of scams during this government rule . The people of the country provided a clear mandate to the Congress led the coalition. The party which is known for playing the aam aadmi card every election. I believe our prime minister has a very clean image but what is the benefit if he is not able to keep his government corruption free. It started with famous Raja 2G scandal followed by billion dollar CWG scam and now the Adarsh scam . The most disappointing fact this time the the image of army is being tarnished . It is a scam made possible by nexus between politicians , bureaucrats and army personnel. The army and the independent judiciary are two institutions of free India which we are proud of . Now with the name of top army brass coming in the scam , the credibility of army is in question.

Sonia Gandhi and PM appears to have a very corruption free image but the party and the government seems to bantering . Why the top leadership is silent on the issue ? When the government is going to clean its own house ? The land which was meant for Kargil Veterans is being given to bureaucrats , politicians and their relative at throw away prices.

People of this country want the answer - Who is going to take the responsibility ? Sonia Gandhi had formed a two minister panel to look after the scam ? I am thinking it is a scam of crores still there is no FIR registered -why? And the committee will come with its recommendation after Diwali. Mr Chavan has been given time to celebrate Diwali . It is an open loot of the government money and still no one is going to jail. Hope the PM will take a tough stand this time. Resignation is not the solution. Until those who are responsible are punished this disease will go on spreading . The day is not far when the bug is going to infect our judiciary and army if it is not checked at right time. The situation is becoming pathetic----today at AICC meeting Congress remained silent over the multi crore scam and instead declared terrorism and communalism is biggest threat to the country. When she is going to understand that corruption is the hidden cancer which weakening the roots of Indian democracy and making us more vulnerable to terrorist attack or a riot. Congress president seems reluctant to come forward and fight corruption. This is sending a wrong signal from the top.

These are criminal offenses and those who are culprit should be given proper sentence. Still the government is not able to pass lok-ayukta bill in parliament . Neither there is any progress on the police reforms . We are behind our neighbors like Sri Lanka on the transparency list . Today our country needs an independent investigation agency .

Financial Innovation - The darker side

The question about financial innovation is, however, somewhat different: it is whether most of the innovations that have been widely touted, such as credit default swaps, have in fact enhanced economic performance. What is evident is that they contributed to the current economic crises, and added greatly to the burden on taxpayers. The AIG bailout alone—linked directly to these innovations—cost taxpayers almost $180 billion, a sum that is hard to fathom. The present crisis even leaped the world into another depression. It took the life long savings form million people. It brought many families on the road. It created the panic . There is also ample evidence that they have been useful in accounting, regulatory and tax arbitrage, activities that may enhance the profits of the companies employing them, but not necessarily the efficiency of the economy. They have helped governments and firms hide their financial doings from taxpayers and investors. And those benefiting from such deception have been willing to pay amply for it, with large profits to the innovators, even if society as a whole loses. It has been found products such as packaging of toxic assets as AAA securities and selling to people is unethical . No one can disagree that this industry comprises of some of the most greedy people on this earth. From them their clients are every thing.
We should not be surprised that the so-called innovation did not yield the real growth benefits promised. The financial sector is rife with incentives (at both the organizational and individual levels) for excessive risk-taking and short-sighted behaviour. There are major misalignment between private rewards and social returns. There are pervasive externalities and agency problems. We have seen the consequences in the Great Recession which the financial sector brought upon the world's economy. But the consequences are also reflected in the nature of innovation, which, for the most part, was not directed at enhancing the ability of the financial sector to perform its social functions, even though the innovations may have enhanced the private rewards of finance executives. (Indeed, it is not even clear that shareholders and bondholders benefited; we do know that the rest of society—homeowners, taxpayers and workers—suffered.)
Some of the innovations, had they been appropriately used, might have enabled the better management of risk. But, as Warren Buffett has pointed out, the derivatives were financial weapons of mass destruction. They were easier to abuse than to use well. And there were incentives for abuse. They made it easier too to engage in non-transparent transactions; and lack of transparency never helps markets to function better. Some of the financial products increased the problems of information asymmetry, exacerbating problems of moral hazard. Indeed, much of the growth of some of these products can be attributed to these information problems, and perhaps to the deliberate exploitation of the uninformed: it is hard otherwise to explain the expansion of products that, it should have been clear, were so toxic.
Regulatory reform is important not just to ensure that the economy does not have another crisis. Better regulations, including regulations that help align private rewards and social returns, could and probably would direct the sector's creativity in ways that lead to more socially productive innovation.

Financial Industry contribution in World Development

Finance is powerful. Let us start with some positive aspects of financial world. Financial services provide vital services :allocate capital, monitor capital use , facilitate transactions and risk management. If financial systems provides these good services , the capital flow to most deserving and promising firms and it maximizes the utilization of capital and as a result enhance the world development. Secondly financial innovation and technological advancement are inextricably bounded together. As the economy expands the complexity of financial world increases. More sophisticated methods are required to access new enterprises and their novel risks. Without a commensurate modernization of financial system , the quality of financial services fall and economy growth slows . It is the fierce competition within the sector which keeps technology upgraded. Nor the traditional capital markets of London or New york have fuelled the technological innovations in information technology, tele communication and medicine that we have experienced over last 30 years.
Let us take example of Bio technology sector.The story of biotechnology in the 21st century provides a natural continuation of this virtuous cycle of financial innovation, technological change and economic growth. The venture capital model of corporate finance did not work well for biotechnology. Venture capitalists could not effectively evaluate biotech firms because of the scientific breadth of biotechnologies, which frequently require input from biologists, geneticists, chemists, engineers, bioroboticists and other scientists, enormous capital injections and expertise with the myriad of laws associated with bringing new medical products to market. It was unfeasible to house all of this expertise in banks or even venture capital firms.
So, financiers innovated. They formed new financial and contractual partnerships with the one kind of organisation that has the breadth of skills to screen bio-tech firms: large pharmaceutical companies. Through scientific know-how, legal expertise and connections with product distribution networks, pharmaceutical companies identified promising biotech firms, helped them create valuable products and attracted other investors. While financial modernisation is not the only cause of technological change, the adaptation of corporate financing techniques has greased the wheels of technological inventiveness underlying economic growth. Put differently, without financial innovation, improvements in diagnostic and surgical procedures, prosthetic devices, parasite-resistant crops, and an array of other life-saving and life-improving inventions would be occurring at a far slower pace.
Even the most conventional components of modern finance, such as debt contracts and liquid securities markets, were themselves once financial innovations that circumvented former barriers to investment and growth. So the financial innovation created by the giants of this sector - BOA, Citibank,Goldman,J P Morgan contributed a lot to the rapid development in past century.
Financial innovation is critical if we are to enjoy rapid rates of economic progress in the coming century, but innovation, change and growth can threaten stability. Improvements in financial regulation can reduce the risks of financial crises without curtailing sustained economic growth. In finance, as in medical research, encouraging the healthy application of human creativity requires some regulatory guideposts.