May 14, 2008, 9:40 GMT
Hamburg - Germany's president, Horst Koehler, has described the world financial markets as a 'monster' that must be tamed.
The German weekly magazine Stern quoted Koehler, who has first-hand experience of the banking industry as a former chief of the International Monetary Fund (IMF), as calling for the banks to admit the error of their ways.
'We came close to a collapse of the world financial markets,' he said of the crisis that has played out in recent months.
'The markets have developed into a monster that has to be tamed,' he said, adding that this must be obvious to anyone in the financial industry who thinks responsibly.
The bankers had evidently invented so many financial derivatives that they no longer understood themselves what effects these had.
'The excessive complexity of financial products and the opportunities to set up enormous leveraged deals with the tiniest amount of equity have caused the monster to grow,' said Koehler. 'It hardly has any relationship any more to the real economy.'
On top of that 'some financial managers are receiving bizarrely excessive remuneration,' he said. The financial industry had made a fool of itself but he had yet to hear 'a clearly audible mea culpa' as an admission of error.
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