More often than not America holds they key to financial stability (and thereby instability) around the world.

From the New York Times - Monday, October 29, 1929: "The second hurricane of liquidation within four days hit the stock market yesterday.

It came suddenly and violently after holders of stocks had been lulled into a sense of security by the rallies of Friday and Saturday.

It was a country-wide collapse of open-market security values in which the declines established and the actual losses taken in dollars and cents were probably the most disastrous and far-reaching in the history of the Stock Exchange.

Yesterday's far-reaching decline in stocks may be ascribed to a general loss of confidence in the market and the inability of any man or group to stem such a torrent of selling, which came from all parts of the world, European selling forming a very material percentage of the stocks forced on the market."

From the New York Times - Monday, October, 1 this year: "Up and down Wall Street, hedge funds with billions of dollars at Goldman and Morgan Stanley, another storied investment bank, were frantically pulling money out and looking for safer havens.

Panic was spreading on two of the scariest days ever in the financial markets, and the biggest investors - not small investors - were panicking the most.

Nobody was sure how much damage it would cause before it ended. This is what a credit crisis looks like.

It's not like a stock market crisis, where the scary plunge of stocks is obvious to all.

It is banks refusing to lend to other banks - even though that is one of the most essential functions of a banking system. It is loss of confidence in healthy institutions ... it is panicked hedge funds pulling out cash ... it is frightened investors protecting themselves by buying a financial insurance policy against bankruptcy at prices 30 times they would normally pay."

It is said that when America sneezes the rest of the world catches a cold.

We can see these repercussions around us as famous banking and insurance institutions around the world, including those in Europe, are reeling under the effects of the tidal wave coming from America with governments coming out of the cold to rescue them with huge bailouts.

EU countries which up to a few months ago were being cited for their impressive economic performances are on the verge of a recession - notable amongst these being Ireland and Spain.

Here in Malta we are being told that all these global happenings will have a moderate effect on us and that our economy is resilient enough to withstand such rebuffs.

So be it and honour to all those, politicians or otherwise, who have so devised our economy as to withstand such onslaughts.

I do not want to sound alarmist, but there are some questions one needs to reflect upon so as to avoid certain dangers that in the days of boom would not be so obvious. The so-called credit crunch comes about when there is a sustained period of carelessness and inappropriate lending by lending institutions.

Haven't we seen in recent years an unprecedented recourse to taking out loans of all kinds by many in Malta, including those of a personal nature as well as those linked with business and industry of all sort and sizes?

Have not our banks made it too easy for anyone to obtain a whole range of loans from a bank with too few strings attached to them and too little safeguards?

Haven't we seen billboards boasting of a home loan within 48 hours? How comfortable can one be that a proper scrutiny has been done by the lending institution when it subjects itself to such a tight commitment? Is not the present frenzied building drive going on all around the island symptomatic of the effects of easy lending?

All this is happening while newly built houses remain unsold for years as prices are purposely inflated through speculation, as can be witnessed by anyone who takes a short walk around recently built areas.

Are these not the same elements that brought about the present financial crisis in other larger countries?

Is it not time, therefore, for The Malta Financial Services Authority (MFSA) to look into the matter and ensure that sound financial systems are being applied before a financial crisis becomes a reality in this country also?

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