SAN FRANCISCO — Gary Hamel, a strategist on management practices who has consulted with major U.S. companies, described "bankers’ bulimia" as he summed up the contributing factors to the housing slump and credit crunch.
"Bankers are as susceptible to manias as Japanese teenage girls," said Hamel, as he displayed an image of youths wearing wildly colored, mismatched socks.
Hamel, who spoke Thursday at PCBC, an annual builders’ conference in San Francisco, said that as with other market cycles the latest has demonstrated a classic "binge and purge kind of experience." And the market is clearly in the purge phase as it recovers from earlier excesses, he said.
"You might think of this as bankers’ bulimia," he said, adding that when fundamentals such as household income and house prices get out of whack they always tend to revert back to some form of balance.
The securitization of mortgage financing led to sketchy valuations of risk, and mortgage fraud also contributed to the credit crisis in making some borrowers appear to be more financially solvent on paper than they were in actuality.
"The venerable cheerleaders of human folly, greed and stupidity," also figured into the mix, Hamel said.
And he credited the Federal Reserve’s "unprecedented actions" in "preventing the housing crisis from mutating into a global financial meltdown."
It’s important to remember that "bubbles come and go," he said, adding that such phenomena are transient and the latest downturn will pass.
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