Greed and Stupidity

Dueling explanations for the financial crisis overlap, but lead to different ways of thinking about where to go from here.

Comments: 125

  1. Don't be so naive. They did it because they could. Rule number one in economics: Never give a sucker an even break.

  2. Greed OR Stupidity, or BOTH

    David, I don't have any idea why you think the problem must have been EITHER greed OR stupidity. The problem was a combination of both, in varying degrees in varying circumstances, clearly. I've worked in a major consulting firm with many large clients, and I've been an exec in several organizations, and unfortunately, I've seen my share of both, and the fingerprints of both (greed and stupidity) are all over the current mess.

    Please, none of this "either/or" stuff. It misses a key part of the point, and it will cause us to get the "solution" wrong.

    Be Well.

    Jeff Huggins

  3. This topic is way beyond my pay grade, David. And surely greed and stupidity must go a long way toward explaining the current crisis.
    But how can you hope to explain "the mess we're in" without referring to dishonesty or lousy/nonexistent ethics? When real estate people close on deals in which they know the people won't be able to make the payments, how can there be any doubt?
    Shouldn't a conservative point out that no matter how strict the regulations, if there's no self-restraint, the system will collapse? Or would that call our entire system into question.... and surely you wouldn't want to do that?
    Vermontague

  4. Regardless of whether it was greed or stupidity that got it into this mess, one overriding lesson has been learned: The American public were suckered into paying the debts of the rich. This is an inflection point in United States history, and not a good one.

  5. Why does it have to be one or the other? What is inherent in these explanations that make them mutually exclusive?

  6. Why do we need to blame either hubristic traders or the financial services industry? In fact, you could not have this financial crisis without both. In order for traders to do their damage, it required a light-touch regulatory environment. The challenge is that traders, if left to their own devices, tend to do the types of things that they did recently. That is why we need regulation. Without the aggressive financial services lobby of the past 25 years, there is no crisis. BUt without hubristic traders their is no crisis either. I know this is a bit tricky but it is ok to have two ideas at once.

  7. The problem is not with the banks -- the problem is with ourselves. We have become a people who cannot save, cannot defer gratification, and cannot honor our agreements. If there was greed, it wasn't with the bankers (or, at least, not primarily with the bankers). If there was stupidity and overreach, it was with everyone who lived so very far beyond their means for so long (and especially with respect to their housing and housing-related debt). The party is over. The wise will learn the correct lessons from what we've done to ourselves and try to prevent history from repeating itself.

  8. Positively the best Brooks article in recent memory, altough the conclusion is, unsurprisingly, that the financial oligarchy should still be nurtured.

    Simon Johnson's arguments carry a little more weight, seeing as he has dealt with crises just like this one literally hundreds of times. The gut feeling of a free-market Republican should be taken with a grain of salt.

    The bankers may not always have known what they were doing, but they knew they were making enormous amounts of money as they were going along. In the backs of their minds they knew that it would end some day. They were looting the economy while knowing that a bailout was around the corner when the house of cards came down.

    Greed is a human emotion that everyone has, and it can never be extinguished. Therefore, we must control greed so that it does not become institutionalized and brings down the economy. The oligarchy must be broken.

    www.usparliament.blogspot.com

  9. Ignorant? Those billons now flowing in AIG's front door and out the back to the banks might be CDO bets on the bubble bursting.
    Geithner can we please see what AIG is paying the banks for?

  10. I'm not so sure that greedy and stupid are mutually exclusive. I think both words could aptly describe a typical board of directors.
    Seriously, how do executives merit pay that is hundreds of times the salaries of their employees?
    How can investment banks use models that assume property values go up forever?
    How can a car company not anticipate that gas prices could go up?
    Really? I work hard and get paid very little, but these selfish idiots fail and get bailed out.

  11. David, neither greed nor stupidity are new to human history. What happened was we just happened to fall in the part of the cycle where greed reigned for many years, until it became unsustainable. It's happened before, and it will happen again.

  12. Stupid right wing greed for ideology. Smart folks from MIT knew the limitations of the math -- boss folks loved the money. This is sucker talk for 'forgiveness', as in "know would have thought..", when we should be in the street!

  13. Your reference list of articles/books is pertinent. What is also clear is that you do not have the expertise/wherewithall to write anything interesting in this area. Stick to politics and hand waving on public tv.

  14. A person does sometimes wonder if you're truly not a part of the Oligarch Mr. Brooks - no?

  15. Yes there are dueling explanations but- at the end of the day we are human beings,subject to base elements in our psyche and no matter how much education, or knowledge one aquires human beings will act upon that which appeals to human desires. Greed is a powerful force and though I am not religious, GREED used to be a SIN but, somehow it really isn't a sin any more. It is excused by financial success and finacial success is mistakenly equated with knowledge or education.

  16. Another stupidity narrative. Capitalism is about greed. Greed is a deadly sin. If you cheat every day for 20 years, it will eventually catch up with you. It has caught up with us. Only thing is that not only greedy people are affected. Simple
    Where to go from here? Reduce the banks size and power and regulate them. Without regulation its a free-for-all and the little consumer has no protection. Move for effective credit card reform. Credit card debt is more of a problem than mortgages.
    Start putting white-collar criminals in with murderers and rapists. Country clubs are no deterrent to financial criminals.

  17. In the late 1970s, the Banking Studies Department of the Federal Reserve Bank of New York was invaded by PhDs from the University of Chicago, who, full of ideology, decided to ignore data and produce papers which said that bigger banks were more efficient in providing services than smaller ones. The data said the reverse was true, but the G-d of the right, free markets, demanded that banking institutions be set free to cross state boundaries and grow to larger size, and free to enter into any line of investment or deposit-taking.

    In a corporate system, the goal of the people who run the corporations is to increase their income and prestige. They will earn more if they are CEOs of a 10 billion dollar corporation which makes 2 per cent on capital than if they are CEOs of a 20 million dollar corporation that makes 20 per cent on capital and is more sound. Hence, it is the view of corporate leaders that bigger is better, even if it's not better for the shareholders. Hence, merging and expanding become an end in themselves.

    Only if the interstate banking limitations are put back in place could the hope of size control work. That, or find a way to change the incentives of corporate culture so that CEOs reward is not measured by the size of the company they run. Carl Ichan recently posted an excellent article here in the New York Times which might help in this fight. http://www.nytimes.com...

    The corporate form must be reformed so that shareholders have better control of their companies. It must become easier for shareholders to communicate with each other and form voting blocks. In this way, they can keep on eye on the corporate officers and managers keeping watch on the operations of major corporations the corporations. To parapharse a recent movie, the question is, who will watch the corporate officers and managers?

  18. "To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand."

    I fail to see how the alternatives you present are mutually exclusive.

  19. There's reason to accept both views and no need to settle on only one simplistic explanation. Obviously plutocrats have always HELD power in this country. Under the opaque aegis of the "Great Decider" the
    "Captains of the Universe" were freed to do a lot of execrable, stupid things that would not have been allowed if they had been seen. That the oligarchs of the U.S. are inclined to abuse power is obvious, and their intransigence reveals their stupidity. If we tolerate and institutionalize their activities we are stupider than they are, and like doting parents of spoiled children, we will reap our reward. Fool me once...etc. I think you are remiss, Mr. Brooks, for creating a distraction, like David Letterman is creating a distraction by demonizing Bernard Madoff. We do need to break up the trusts and establish regulations to create a free democratic economy and destroy oligarchy.

  20. And then there are the not-stupid ones who devised these derivatives, profited from them and then got out before their house of cards fell, as they knew it would, because they were not-stupid. They were greedy, sir, greedy and very much aware of global consequences.

    One must hold the argument of stupidity to the highest standards. Smart, greedy people will train less-smart greedy people and then take the money and run, leaving the latter to get it wrong. There will always be those who understand structures and circumstances and use them to their advantage. Circumstances can't always be predicted, but structures can be monitored, revised, eliminated if necessary, when they prove susceptible, or too susceptible, to manipulation.

    Smaller banks, yes. And more limited corporations. A vigorous oversight of international financial institutions, complete transparency of national ones. A requirement that all cross-national commerce be carried out in the interests of the international community first, the stockholders second.

    And a testing of new financial instruments as rigorous as that of pharmaceuticals (after improved testing of the latter, of course).

    And jail, sir, lots of jail, for the borderline sociopaths who thought this stuff up and plundered our world into penury.

  21. Well, when you are not an apologist, you don't have much trouble seeing how the two views match up. Business executives failed to perform one of their major functions --to manage systemic risk. Were they stupid? You bet. But they were rewarded very handsomely for being rich --and, here is the “piece de resistance” --they retain those rewards today, for the most part.

    So it's a reincarnation of the Prisoner’s Dilemma --they could have done their job, and they might have been rewarded even more richly, in the long run. But that would require trust that others would behave appropriately. The next best outcome for THEM --and the one they could guarantee --was to reap rich rewards by behaving inappropriately.

    So they did.

    Are you really this dumb, or are you merely guaranteeing rich rewards by appearing to be so?

  22. Everyone believed in the experts - those who were most educated, skilled, experienced in the ways of money. They sold us a dream and everyone believed in it - wanted to believe in it. Believing in it made it a reality and - everyone made money. We created our reality and it was working. To doubt was to deny the faith. These 'heretics' were not only unwelcome but were a threat to the illusion that had been created. If people stopped believing then it would all collapse. Why would they stop believing, though? These people were the experts and other experts said they were right - everything was on solid ground and "nothing will go wrong"! We believe what we want to believe so it becomes something of a self-fulfilling prophecy.

    It was presumption, pride, arrogance and greed that created this illusion. When reality revealed it was all a dream - wishful thinking - it all came down.

    I've read that wine is made in an ancient and interesting way. You get juice and put in yeast - a bacteria. This bacteria loves sugars and immediately starts to consume the sugars in the juice. The yeast is happy, reproduces like crazy and continues to consume the sugars. There is one problem in this perfect world for the yeast. The yeast excrete alcohol. They consume and excrete until the alcohol content is so high that it poisons the environment. The yeast all die and the wine is ready to pour!

    We decide whether we want to live like yeast. We can allow our lust, greed and pride to be the basis of our actions. The end will be disaster. Or we will realize that such values are self-defeating and actually destructive. We must develope self-control, discipline and realize that all we do affects everyone else. We are all in this together - must take care of each other, our society and economy and the earth itself - because if we think only of ourselves, abuse the world, each other and our economy - everything will come crashing down.

    The ten commandments were not taught to 'rain on the parade' and stop the party. They were developed to safeguard those things that are most precious in life and society. When we neglect them, disregard the principles they uphold (and the treasures they guard), it becomes like the jungle - each man for himself and survival of the fittest. We are, after all, God's own children. We should act like our Father in heaven - being responsible and taking care of our brother - using self-control and thinking of the other, our brother. In taking care of our brother - we take care of ourselves. Yes, brother Cain, you are your brother's keeper.

    Peace to all!

  23. There is also a very good reason why, even if you know the fundamentals don't support the valuations, which plenty of people did, you still have to play the game: if you don't, you'll go out of business. A bubble is essentially an arms race. It may be in no one's interest to continue upping the ante, but if you don't then you're out of the game.

  24. Nice try. But why think it was either greed or stupidity. It was both. Those traders would not have been able to bet the house had the oligarchy not taken power and pushed de-regulation while neutering supervision. The stupid traders made millions in bonuses by betting on securities they did not understand, and made billions in bonuses/dividends/options gains for the oligarchy. It was greed, stupidity and myopia; they could not see past the next quarter earnings release.

  25. Again with the either/or. Why do so many of your columns come down to ideology and false choices? Why is it not obvious that both greed and stupidity played a part in this crisis? Not to mention a misguided policy of deregulation, heavy military spending, incompetence at the SEC, myths propagated by the media that house prices can only go up and Dow 30,000 is just around the corner, gullible and math-challenged 'regular people', the list goes on.

  26. Those poor, poor stupid bankers. We better not limit their compensation, then. Otherwise, how would we attract the best and the brightest?

  27. ...methinks that the key culprits were the rating agencies. It has been established, I believe, that they knowingly (or through unprofessional negligence or through "contaminating incompetence") gave high ratings to securities or packages of securities that were clearly junk. The people/banks/institutions that bought these securities did so (I'd guess mostly) in good faith. They were the disease vector but essentially innocent of malice or stupidty or arrant greed.
    I am surprised that so little attention gas been paid to the culpability of the rating firms and that no punitive or corrective action is contemplated by the Government or the financial industry itself.

  28. The warning signs have been apparent for some time from Nick Leeson the so called rogue trader who brought down Barings bank in 1995, to Jerome Kerviel an apparently junior trader who almost destroyed Societe Generale, France's second-biggest listed bank with $7 billion rogue trade losses, that became clear in January 2008.

    They were obviously not isolated cases, and inhabited a world accustomed to using customers money as if they were gambling chips at a casino. Infact risk taking was considered derigeur (its very easy when it isn't your own money no doubt).

    In essence society needs to reevaluate itself and it's priorities, and hopefully top graduates will no longer be lured by the prospect of an MBA and rush of to the nearest fancy merchant bank, but choose to do something productive and beneficial for society instead. Now that would make a pleasant change. Greed to use the vernacular, sucks.

  29. Excuses will not do this time, no matter how "STUPID".

    The president is under the influence of the oligarchy, but he will come to the right way soon, like it or not. Instead of the dead end, people of this country demand:

    "Smash the oligarchy. Nationalize the banks. Sell them off in medium-size pieces. Revise antitrust laws so they can’t get back together. Find ways to limit executive compensation. Permanently reduce the size and power of Wall Street."

  30. Sounds like it's a combination of both, but it wasn't limited to just the bankers, they just made it possible. They were greedy so they made these complex tools to create a bunch of capital out of thin air without properly understanding the possible consequences. Credit/Loans were too easily accessible to irresponsible people who couldn't repay them. The mass influx of "money" led people to believe they could afford anything. I mean look at all the cheap crap people buy that they could do without. Eventually, the exponential growth had to stop and everything collapsed as most people were in debt and a crop of poor overpriced products were no longer wanted leading to massive lay offs. Sounds like a national ponzi scheme that everyone bought into.

  31. So we "nurture" as you say the hedge and securities bankers to happy new lives as 2, 3, 5 percent of our GDP?

    It's not even necessarily individual greed, but systemic, to the banking industry, greed. The masses shouldn't be bailing these industries out because they aren't designed to redistribute the money or support the rest of culture.

    I call this "trickle-down stimulus."

  32. Johnson is correct. An oligarchy has taken control and still holds control of this nation. They created the havoc and received fortunes for themselves. They get to keep position and the proceeds because they also have control of our government, and our news media.As Mr.Obama has said in futility, it’s all perfectly legal. The American people appear to be totally impotent in front of this powerful 1% that controls almost 50% of the wealth. The Chinese and now the Europeans are sounding the alarm bells loud and clear, but we don't seem to want to hear. They got burned badly and we have lost their confidence. It’s just a matter of time before they figure a way to cut their losses and run.
    As for our greedy ruling minority, they are poised to increase their share, and rearing for a fresh go-around in the quest for more profit.
    A new big war, perhaps?

  33. Arrogant traders around the world were gambling, David, plain and simple. This leads me to believe that greed and stupidity played almost equal roles with greed winning by a few points. Stupidity led some to play the game too long while greed (and a few extra IQ points) led some to get out while the getting was good. Cassano (AIGFP) pocketed 280mil thanks to Phil Gramm who engineered the most massive deregulation of the financial industry since Emperor Hien Tsung invented paper money in 806 A.D. Even after AIG posted an $11.5B loss in Feb. '08, Cassano was allowed to keep $34M in bonuses. He also was kept as a consultant (to the tune of 1M/per month even after taxpayers had been forced to hand AIG $85 Billion to patch up his screw-ups. The last I heard he is hiding out in his lavish townhouse near Har London and could not be reached for comment. The bottom line is that he and most of the rest of the criminals have gotten away scott free, thanks to everyone from Reagan thru Bush, Jr. Trickle-down and deregulation - the former a fantasy and the latter the end of the financial system as we know it.

  34. Do i get it right ?
    The dispersion of risks led to an entropy of security, which means, there could be a growing eigenvalue.
    Like people synchronizing their pace while walking over a solid bridge, which will rock the bridge and finally let it collapse ?
    So synchronisation had been rocking the economy to death ?

    So what's your proposal ?
    Making everything more transparent will probably not only apply on the financial instruments, but also on the synchronisation.
    Maybe making everything several sizes smaller will be a good idea after all, not only because of 'not to big to fail', but because of the improbability to act simultaneously.
    That means, there should be no one "Wall-Street", but a lot of "Wall-Snickelways" ?

  35. we got here thanks to two things, Lindsey Graham's bill in 1999 repealing Glass and other republican de-regulations.... and greed. So yes, stupidity and greed.

  36. David,

    I am disappointed that you linked to Felix Salmon's awful article about the Gaussian copula model. The copula model is just a statistical construct, and blaming it for giving "finance whizzes the illusion that they could accurately calculate risks" is like blaming the invention of the pneumatic tire for enabling freeway accidents.

    Like you, many commentators are quick to say that the bankers who caused this crisis were "good at math but ignorant of history". On the contrary: if only these folks had really understood the math they were using and its limitations, they would have bet more conservatively. We shouldn't distrust people who know the math: we should fear people who *don't* know the math but still use it. I'm sure Drs. Mandelbrot and Taleb would agree.

  37. It absolutely blows my mind that people and journalists are just figuring out what was going on down Wall St way and with finance in general! I am going to put this as succinctly as possible ; you lower rates to 1962 levels, flood the market with grotesque amounts of liquidity, telegraph Fed policy ( ie remove market risk ) and ignore every major warning sign, watch credit spreads collapse so that single A and junk status are getting near AA financing, rating agencies begin to not do their job, over exoticate derivatives without appropriate option adjusting hedges ( ie one way bets or over leveraged hedges predicated on small market shocks ) and presto we have just played global hot potato and the music stopped and we are all holding the potato, it had to happen ! It is that simple, it is not rocket science and it was inevitable, I am actually surprised it took this long to collapse instead of in 2005-06. I stress this, the Dow went through 4000 for the first time ever in 1995, how long did it take to get to 4000 ( how many decades ? ) ? We let it triple. We also brought back super tanker LBO's by way of hedge funds and private equity and gross amounts of debt to do deals that had no long term shareholder value, only a breakup value and flip mirage for stock owners and Wall St M&A and Trading bonus time. The markets and people were on credit crack everywhere, we consumed beyond our consumption and created Petro states to further over liquidate the markets.

    So now we have the likes of TARP etc, which are really optics at this point, how will those ill created assets ever return to even 50 cents on the dollar without another grotesque asset inflation period again to get them there ( this is fundamental ) ?

    What we will see is mark to market unwinding of crap, it will be like cancer surgery for several years, not only that consumers are debt ridden and getting loan sharked by credit card companies, consumers need debt relieve more than the banks that got them that way !

    Why is anyone surprised and guess what there is no quick fix or bubble to yank us out. So we print money and issue debt and grow deficits to bailout industries economies that helped take us there, why ? Simply because we would sink so far into it that it would take decades and gross amounts of money to bail the markets and the global economy out, we have no choice.

    Wall St is now a panacea, it rallies on the silliest of a silver lining. The same idiots who traded it up on stupidity cannot get it, we are overvalued and asset inflated. Until the market gets it and the those assets deflate to deal worthy investment worth, only then and I stress only then can we begin to reinvest and grow. Those assets never ever should have been allowed to inflate to such crazy levels. Bottom line was that it was the Fed's responsibility to act prudently and in a timely fashion with real asset deflating interest rate hikes. This at a time when we could have de-leveraged and sent a signal that the party does not go on forever. At the end of the day it always pops on its own at a far higher volatility and velocity ne sans rate increases.

    Having issued debt globally for many years this was so obvious. It blows me away that only now Joe Average is only now realizing what goes on in the markets and Wall St specifically. It was unregulated Vegas, we did not learn nor will we.

  38. The title of your column got it spot on. It seems that if there is to be a new One Dollar coin, we should dispense with the profile of a long-dead President. Just have "In Greed We Trust" on one side, and "E Pluribus Stupidus" on the other. Accurate and appropriate.

  39. "We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand."

    We got into it because the American public is living in a world that it doesn't understand. Both white- and blue-collar workers in America are so parochial, provincial and less educated and informed about what is going on in the world compared to their counterparts in other countries.

    How long will that take to fix?

  40. This is good analysis as far as the banking part of the mess goes. But it all started in the housing market. The Left's narrative is that predatory lenders, including many banks, somehow seduced millions of would-be homeowners into signing on the dotted line mortgages, with zero money down, they could not sustain if ever the bubble burst and variable interest rates went up.

    The more likely narrative is that predatory borrowers pressured the banks to write mortgages for minority, poor, and illegal immigrants so that they too could partake of the American Dream. In fact, this was official policy in the Clinton administration, to raise homeownership among minorities from 50% to the 75% level of white homeowners--regardless of cost. In other words, affirmative action was brought to the housing market. Housing became an entitlement.

    As long as home values rose, this new class of homeowners rose with the tide. When the bubble burst, as all bubbles do, they were in immediate trouble, and those sub-prime mortgages became "toxic assets" bundled in with other assets and sold world wide. Fannie Mae and Freddie Mac backed millions of them.

    Banks, as rule, certainly local banks, want their money back with interest. The only color they are really interested in is the color of money. It was foolish and stupid of them to go along with this new entitlement program. But the pressure came from the outside rather more than from the inside. That narrative rings more true to me. I just can't see these predatory lenders roaming poor neighborhoods, pen in hand, knocking on doors, trolling for bait.

  41. You seem to fail to realize that what spawned this "stupidity" was the profit motive. People could make money off "certain" bets. They didn't ask if their valuations were "real" because it didn't matter. What mattered was what the market would bear. And as long as the market was going up, which is was for quite some time, the would reap the profits. It was a simple Ponzi scheme. Only unlike Madoff's, this one was perfectly legal. Of course at some point it would collapse, and they knew that, but it was their clients' money at stake, not theirs.

    At any rate, your admission that the free market bred "stupidity" should speak for itself. Unfortunately you seem to be blind to the connection.

    It's OK to admit that greed isn't always good.

  42. Why one theory or the other? Both sound very reasonable. Greed + Stupidity = The bind that we are in now.

  43. Mr. Brooks seems to have a problem, considering more than one cause for a complex result:

    He notes "the greed narrative and the stupidity narrative. The two overlap, but they lead to different ways of thinking about where we go from here."

    I disagree. Both of these effects are in play.

    For many years I was confounded by the saying: "If you're so smart how come you're not rich?" For 30 years this troubled me until I turned it around: "If you're so rich, how come you're not smart?"

    This created oodles of insight.

    Why are the rich so stupid that they do not practice enlightened self interest to protect their gravy train? Ans: Greed drives out intelligence. What happened to their counterparts in the French and Russian aristocracies when they demonstrated the same stupidity as a result of greed and insulation. The guillotine!

    What about uncertainty? Well, if you're opaque to the effect of your behavior you're not assessing anything--you come to believe your illusion of superiority.

    This is still going on in the unholy alliance between the banks who fund the campaigns of politicians in exchange for favorable legislation. Just today, the Congress passed legislation that is allowing banks to value their toxic assets as they detemine.

    This is the same sort of recipe for financial disaster that created this catastrophe in the first place. But our representatives have come to value their political careers far more than the society or the people they represent.

    Perhaps it's really time for the guillotine! How else do we rid ourselves of this cancerous class who like termites have worked their way into the interstices of our political and economic establishments where they feed on us to eternal detriment?

  44. Seeing the title and having read so many of Mr. Brooks' Op-Eds, it came as no surprise that he would favor "ignorance and uncertainty" as the best explanation of how we sank into the abysmal soup. Blame it on the little guys, not the capitalist pigs.

    But there is a redeeming thought in Mr. Brooks' effort tonight: "the way instant communications lead to unconscious conformity." Why -- given unconscious conformity -- he expect "a diversity of viewpoints and expectations that would balance one another out" is beyond comprehension. "Global communications" with everyone saying and doing the same thing pretty much assures that "people in the financial subculture" will adopt "homogenous viewpoints."

    The larger problem with Mr. Brooks' support of the stupidity hypothesis is that not all people were stupid. Many, some as prominent as Warren Buffet were screaming "watch out." Which pretty much shoots down both the stupidity hypothesis and the supporting unconscious conformity hypothesis.

    The test of the greed hypothesis, which is really a conspiracy theory, will be whether the same set of crooks and liars remain on top when the smoke clears. If so, then we have to credit them with first robbing us, and then cooling out their marks -- the way Bernie Madoff did for so long. Apparently Mr. Brooks would like to help them remain there, by dismissing their conscious win-if-we-succeed/win-if-we-fail scheme as "stupidity."

  45. Greed and stupidity were both to blame, but Brooks fails to identify the right parties.

    The people who built the financial empires on houses of cards were not stupid; they were intelligently pursuing self-interest to maximize money, and would do exactly the same again in the same environment if given the chance. (They would simply try to sell their credit default swaps and/or toxic assets earlier than the other guy next time.) That's greed, but greed is not to blame.

    The stupidity came from Conservatives in the press and in Washington who successfully eliminated regulation and patted themselves on the back for it. They took the restraints off of banks and invited them to play options, instead of equity, and the banks did. All banks made tons of money, as your statistics show. But some bankers playing the game got caught without a chair when the music stopped.

    Deregulation of the financial markets was as stupid as removing all the bars between cages at the zoo; each animal will act in their self-interest until only a handful remain fat at the top of the food chain.

  46. These narratives are not mutually exclusive. Both are true for different companies and parts of the financial sector. It's not clear why Mr. Brooks discounts the greed narrative when it so obviously accounts for some of the important behaviors that got us into this mess in the first place. And maybe it's greed combined with stupidity that is the most dangerous narrative of all.

  47. I haven't read the essays linked to, but this column seems to present a distinction without a difference. How do you make market structures more transparent, straightforward, and comprehensible without the government dictating the terms? And wouldn't aggressively segregating financial industries (savings banks, insurance companies, brokerages) amount to government restructuring the financial sector? Sure, recapitalize functioning markets. And what do we do with the mammoth insolvent banks? It's certainly not hard to believe that inbred oligarchs grabbed power by means of arrogant traders who didn't understand what they were doing -- or vice versa.

    I feel like I should disagree with your stated distaste for government intervention, but really, I don't think you even make a case for an alternative.

  48. Obviously, we should smash the oligopolies, as no one should be allowed to get "too big to fail." However, the ultimate origins of this mess are clear. We know that the crisis was caused by the burst of U.S. housing bubble. O.K., most will admit that much, but why did the bubble form and inevitably pop? Answer: the government cajoling of the financial industry to loan more to minorities to buy houses, thus to more with poor credit, and so all the new buyers sent home prices up. They could only afford those homes while the values were going up...you get the idea. This is the virus period. No serious-minded person can deny it. Now (under the naive assumption that our leaders will admit as much and end this practice), we must consider how the system might have performed without this obvious defect.

  49. Nice try David but I'm sticking with the greed theory.

  50. You're even more perceptive than you seem to grasp, Mr. Brooks. Of course, both greed and stupidity were working hand-in-hand, and they fed off of one another in a self-congratulatory frenzy.

    The bankers themselves agreed in a recent survey that they were outlandishly rewarded for short-term gains that demolished long-term viability ~ and that that must change. With all that razzle-dazzle math in play, practicing due diligence seemed like a quaint impediment to financial glory.

    Brilliance alone, as usual, was no substitute for sound judgment, or even for common sense and a dose of humility. Or a rudimentary grasp of history.

    If hubris, stupidity and greed ended up hurting only the self-anointed elitists on Wall Street, the rest of us could conclude they deserve what they created. But millions of innocent people do suffer as a consequence; ten percent of our own citizens now subsist on food stamps, and the misery is far from over. It won't do to attribute that to stupidity alone. It even goes beyond venality: indifference to destructive consequences for others ruled the day. Just how will we regulate that?

  51. All of the financial gurus have failed to understand that it is the economy that is the problem.

    The financial institutions are irrelevant since all of the wealth of America is gone. The years of 4 trillion dollars of lending wiped out the wealth of America. Financial institutions that required massive amounts of cheap capital are of little importance in a world where these massive amounts of cheap capital are no longer available.

    The policy of the government has to be the policy of the consumer to spend every one of the remaining dollars wisely for survival.

    Survival for the government is to spend wisely to build up the economy and not waste the remaining dollars on an over built financial system that no longer serves any purpose.

    Financial institutions are necessary for the economy, but currently and for many years to come, financial institutions will be in over supply just like the over supply of thousands of GM dealerships through out the country.

    Instead of financial gurus, the nation needs gurus with ideas and analysis on how to rebuild a very weak economy.

  52. Mr. Brooks, two points need to be addressed in this discussion: 1) The role that other institutions played in the elevation of greed in American culture. Look at the curricular of MBA programs--thankfully a number of Deans are taking a hard look at themselves. Greed--not contributing to society--is lauded. According to MBA programs, the only legitimate interests to protect are shareholder/investor interests, as if the community and employees are not legitimate stakeholders. This is the big change of the past three decades. 2) Higher education as a whole is culpable. This crisis as brought on us by the educated class--not by the poor or the much maligned single "welfare moms."

  53. Okay, then, what is the theory guiding us out of this economic stall/tailspin?

    I tend to favor the greed theory of what got us in, but I am amenable to hearing a stupidity-reversing theory for getting us out. Is this one you can help us begin finding soon? Because Congress, as today's budget songs revealed, is still in the same old same old cut taxes for the wealthy, but not for the others of us. And the same old same old spend spend spend.

    Hopefully the stimulus efforts will help, but it is much too early (the fourth consecutive month of over 600,000 job losses) to say. We must remember that all the FDR stimulus spending didn't amount to much economic recovery until WWII stimulated a dramatic economic uptick. And that was when most corporations had again been whittled down to manageable size. We haven't even begun considering doing this to our unmanageable corporations today. We stick to the "throw another trillion at them" theory. Does it really matter whether these corporations are managed by those who are too greedy or too stupid? I do not see how it could possibly work to transform toxic bank assets into toxic public assets. I apparently lack confidence in Geithner's brain and Obama's charm.

    But thanks for the stimulating thought.


  54. I disagree that those running Wall Street did not understand the limits of their financial models. I am in Engineering and develop and use models, and work with others who do. The good ones are deeply skeptical of models, and use them only to answer certain well defined questions where their value is clearly understood. And the people running Wall Street are good -- very very good.

    No, the catch is they knew that before the models are proved wrong and things go south they would have made their 10s of millions, or 100s of millions. And they knew that if they did the prudent thing and acted conservative, less scrupulous folks would do it anyway and make the money.

    It is critically important to reform the system so there is no way for anyone, starting with CEOs on down, to make enough money within say a 10 year window to live in obscene luxury for the rest of their lives. Either limit executive compensation, or have 80%+ tax rates on incomes over a million dollars or so.

  55. Well done David. As usual you distill the chaos down to the manageable so we scared onlookers understand. And now I know why you are so smart---you read EVERYTHING.
    Thanks

  56. Come on. When the financial sector commands 40% of the profits in the economy there's a lot more than naivete and blind stupidity going on. The mortgage scams and complicated securities were nothing more than financial dealers taking advantage of the basic desire of everyday people to have secure shelter. What productive value do the securities held by the financial institutions provide other than to suck profits out of the real productive elements of the economy? What is it other than greed that provokes these banks to charge $50 late fees on credit cards, and upping the interest rates on unpaid balances to levels above 20%? If this isn't greed and usury I don't know what is.

    It's time to stop making excuses for the ruinous actions of those who should have known better. It's time to get focused on beneficial and productive activities that make life better for the many and not the few. Our government needs to act for the benefit of the many, and if that means nationalizing the banks and making rules that will deploy the capital for the benefit of the many, then so be it.

  57. Excellent thoughts on why we are in the mess that we are in. Where was the press when the share of corporate profits of the finance industry more than doubled as a shore of total profits? That is a clear red flag. Where was the press? Where was the Fed? Sure, stupidity and group think had a role, but so did those who benefitted from the tulips growing. Remember when Tom Wolfe warned us about the Masters of the Universe?

  58. I think you was on to something there at the stories end, banks should live separate lives. But the thing that I think really went wrong with this is people got away from tradional savings, and went to looking to the market instead and forgot the golden rule of, invest only what you can afford to lose. People went after the market like slot machine at a casino, that always hits jackpot. Even the Bush Administation was talking about putting the SS funds in to it, people went crazy greedy.

  59. When, and if, all the bits of this disaster are teased out and clearly understood, at the very least charges of criminal negligence should be laid against the major players. This disaster is the biggest and most immediate threat facing us all. The state of mind of the perpetrators is interesting but less important than punishing the guilty. It is about time the Finance industry understood the maxim "first do no harm".

  60. I'm not sure why you see the theories as 'dueling' when they can coexist. The crisis was brought about by a combination of greed and stupidity. The oligarchy thought it had found the perfect system, but when it came tumbling down the players gave priority to looking after each other rather than saving the system - quite possibly they genuinely believed (and believe) they were the ones to save it.

  61. Wall Street spent a decade filling its ranks with the smartest graduates it could get. It's doubtful that all of these intelligent, critical thinkers really trusted the risk models when they didn't resemble reality.

    The problem was systemic. As long as there was money to be made by ignoring reality, the banks had no short-term incentive to admit doubt of their models. In fact, shareholders demanded that the banks make the riskiest, most profitable bets allowed by the law. Middle-management, with its stock-based compensation, supported these demands.

    Wall Street is being brought down not by the actions of any particular people, but by its preference for short-term profits over long-term stability. This preference created a system where prudent and intelligent employees had no power to change the corporate direction.

    The executives on which so much blame has been hoisted rarely work at a low enough level to see these problems coming. They must trust what their middle managers tell them. We can't hold them responsible for not understanding the risk models, because it's not their job to do so--that's why they hire mathematicians. The size and structure of their corporations prevented them from understanding the whole picture.

    Forcing banks to shrink and narrow their scopes will once again make it possible for single executives to fully understand their balance sheets. This is a good thing, since it puts human intelligence above the whims of the system.

  62. The primary motivation for the malefactors of this debacle was the rewards they had gotten, and had continued to get up to the point that the scheme collapsed. The theorems, formulas and equations were useful tools to sell their racket to an audience that has great belief in the science of numbers, and the salesmen, as you have acknowledged in your last paragraph, were not mathematicians themselves who drew up those equations nor could they have cared less whether they understood them or not. They knew the most important thing a decision maker in their position needed to know which was the answer to the question, "does it work?". Well, it worked until it stopped working.
    But that fact does not necessarily lead to solution you seem to fear most on where to go from here, the solution you ascribe to the stupidity explanation is the theory, while the one you ascribe to the greed explanation is the practical application of that theory. Indeed that is what is happening even now.

  63. Greed and stupidity aren't competing explanations; they are two sides of the same process.

    Greed is stupid because it leads collapse. Greed ends up killing the goose that was laying golden eggs. In the nursery tale even young children understand that geese don't lay golden eggs, but in the real world greed makes us forget. Last fall Alan Greenspan was quoted as saying that he was surprised that the financial system was not self-regulating. Duh! It has ever been thus.

    Rules, regulations, laws play the role of the grown-up supervising the human playground. Societies make laws to control the worst consequences of human behavior.

    If there were no traffic laws and no regulations of vehicles and drivers and no police enforcement traffic would become a big mess and auto fatalities would rise.

    So whether one leans toward the greed explanation or the stupidity explanation of the financial crisis, the long-term solution is the same. We need new smart regulation and enforcement. This is not because government is smarter than the private sector, but because government is the human institution to manage this kind of self-regulation that benefits everyone by preventing stupidity (greed) from permitting the strong and aggressive and lucky from overwhelming the weak and less aggressive and less lucky.

    As John Kenneth Galbraith observed - unbridled capitalism leads to private splendor and public squalor. How does that make sense?

  64. This crisis is because that our country moved to financial engineering from innovation engineering.

    This crisis is because that "greed" rather than "scientific advancement" is the economy driving force.

    This crisis is because that our education is so poorly done, most people can't do quantitative risk assessment.

    This crisis is also because that we still think that "God blessed us" -- instead of everyone in the world. We did not learn anything from Asia crisis in 90s. We thought that we were special.

  65. I believe this "merger" of Wall Street and Washington was really a "Corporate take over" of our government. And until there is total divestiture, the remedies to come from Washington will likely have the smell, look, and feel of Wall Street all over them. It is tempting to think that we can return to the good old days by just making it so - bankers do banking, insurers write and cover policies, brokers buy and sell stock... But such a pure, ideal world did not exist in the past, rather, that past was merely the start of the road that led to where we are today. So it is a mistake to conclude that simply returning to those good old days by itself is "the solution". Something larger and harder to achieve will need to acompany that. A permanent way out of this mess can only come if that solution includes the total extrication of Wall Street and Corporate influence upon government.

  66. I generally agree with your "prescriptions". On the analysis side, however, I do see a lot of greed -- particularly in the commercial banking sector. Back in the days of Glass Steagall we had two kinds of entities with vastly different products, cultures, aversions to risk, skill sets, and compensation. Commercial banks were charged with maintaining the core (somehat mundane) aspects of the financial infrastructure: retail banking, commercial lending, credit cards, mortgage originations, etc. Investment banks were responsible for managing risk in whatever way they could (or saw fit to). Commercial banks were regulated, investment banks (in general) were not. Commercial banks more or less broke even on their products (making most of their profits from credit cards). Compensations (in line with their modest profitability) were modest. Their culture was conservative and fairly risk averse -- there were few if any "quants" on staff.
    Across the street the investment banks were (for the most part in the 80's and early 90's) wildly profitable. Compensations were high, their appetite for risk was unlike that of any other sector in the economy. They were profitable, but they took large risks, and their risk-adjusted compensation was perhaps not all that out-of-line. Sometimes they got it wrong (1987 comes to mind), and they took their lumps. In the 90's commercial bankks wanted a piece of this pie. To my mind they saw all of the rewards, and none of the risks (their greed obscured much). They got Glass Steagall set aside, and also many interstate banking rules (which kept them of modest size) were put on the shelf. They merged and merged again jumped into all kinds of businesses (derivatives, mortgage backed securities) for which they had not the skilled staff (quants), or the discipline to appreciate and appropriaterly manage the risks they were assumming. It's not surprising therefore (sadly it's almost laughable) that they can't figure out the value of the "toxic assets" which they hold. (I suspect at the end of the day we will find that a lot of them aren't as toxic or valueless as is now assummed -- the problem is not lack of value, but that the holders can't accurately figure out what the value is -- this is what managing risk is all about).
    So yes, I think we need to go back to something like Glass Steagall: regulate the heck out of commercial banks, and let the investment banks get on with doing their thing with little or no regulation, and no possibility of government bailouts -- if they get it wrong, tough!

  67. I suggest both of your arguments are right and you have made an unnecessary dichotomy: the oligarchs did grab power and they didn't understand the high-stakes game they were playing. It is perfectly obvious that the legal framework for the financial games played on Wall Street were not given to them under duress. To the contrary. It is more of a stretch of logic that these high-flyers didn't understand the high-stakes game they were playing. They thought they knew but until they lost all of their and our stakes at the table, these folk wouldn't admit their ignorance. Both models need to be taken into account.

    "To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand."

  68. "There is no way for thinking to solve the problems created by thinking itself. Mankind is doomed." UG Krishnamurti
    The economic disaster we find ourselves in cannot be solved by the ideas of economists and politicians and pundits. The 'solutions' they provide will only make the situation worse. Everything which has been done so far and planned for the near future to save the global economy won't work, and even if it 'improves' the situation temporarily, sustains the rapid rate of global environmental destruction.
    If Nature acts what will be It's solution? The crushing destruction of that which threatens it - the Human Species.
    Nature takes it's own time. A Billion years is nothing. The 'cleanup' of the Human Mess won't take long. Unless in the last days all the nuclear weapons are set off and destroy the millions of other living things on this planet.
    And what is so special about the Human Species? Why do we think we are superior to all the other creatures? Why are we so proud of our 'accomplishments' when it is only the humans who have separated from the rest of Nature and destroy life unnecessarily? Is any other species separate from the flow of life? Does any other species cause destruction to the environment? Does any other species kill except to eat for survival?
    So, more Hurricane Katrinas are coming and absolutely necessary for the Nature. They are only a 'disaster' to the Humans who stupidly and arrogantly and blindly built New Orleans and destroyed the natural protections of the barrier islands. The coming 'catastrophes' are the most natural thing to happen. The wars that will be fought over water and land and other resources will make the wars of the 20th Century seem like a picnic.
    We can watch while the last seemingly good and decent man Obama will be destroyed by the failure to come, starting in Afghanistan.
    Good luck to us all.

  69. Even though it is informative to explain how the two narratives differ, it seems likely that the current predicament resulted from the combined impact of both narratives. I'm not convinced that either narrative was overwhelmingly dominant as the single mechanism responsible for the current crisis. When treating patients who have a dangerous, multifactorial problem, the most effective and safest approach is usually to start with a treatment plan designed to each major contributing factor.

  70. Why are greed and stupidity limited to the elites? Weren't the American people consumed with greed (although perhaps gluttony better captures it)? Weren't the American people monumentally stupid in allowing a desire for immediate gratification through consumption to overwhelm their reason?

  71. Brooks, how does China have ANYTHING to do with causing this crisis? It is China keeping the U.S. alive with its investment into our treasury bills. You ignore that the U.S. profited greatly from betting on the economic rise of China. You can't simply mention China in a sentence and suddenly have that be the quants' bug-a-boo. It won't stick.

    Unlike you, I think this crisis was not because of stupidity. There were whistleblowers, after all, and many who worked with these mortgage backed securities knew they were bad, as the Atlantic article states. You call it stupidity why banks loved these investments so much, without acknowledging banks that cut down on the number they had because they knew they were overvalued, or the profits of guys who went short on them, or Paulson, for example, who sold a great deal of them at the peak of the market. You ignore that many people were making money on the rising asset values of these securities. They didn't want to stop. They saw their balance sheets and saw mounds of money, with dollar signs, as Iceland did. They bought more and more junk because it was there to buy. These quants are not stupid Brooks; instead, they looked into their packed wallets and thought that life was good.

    In our governments' case, you mistake necessity for hubris. These vast infusions of money are barely keeping us in the inflation range. I'm surprised you are not at all afraid of a deflationary spiral!

  72. David, back on July 1, 2008, before the election, you wrote a column for the NYT entitled "Obama’s Money Class" At the end of the column , you wrote:

    "If the Democrats are elected, this highly educated class will have much more say over policy than during the campaign. Undecided voters sway campaigns, but in government, elites generally run things. Once the Republicans are vanquished, I wouldn’t hold your breath waiting for that capital gains tax hike or serious measures to expand unionization.

    Over the past few years, people from Goldman Sachs have assumed control over large parts of the federal government. Over the next few they might just take over the whole darn thing. "

    Pat yourself on the back, David. It turns out you were right. It really is that simple.

  73. I think both greed and arrogance (stupidity if you will) were in full bloom in this drama. Thus, I think we need reforms that will effectively attack both types of failure.

    One interesting story of the utter failure of regulation of the shadow banking industry (railroading of Brooksley Born) is captured at:

    http://www.stanfordalumni.org...

    And of your comment about "elites taking care of their own", were you thinking of Mr. Geithner?

    http://www.ritholtz.com...

  74. Mr Brooks, This didn't happen all of a sudden. The economy seemed to be chugging along well only to those in denial, making tons of cash with their eyes closed. Any sane person would have deduced that it was unsustainable and would come crashing down soon. Greed was first and formost the reason. Incompetance as an excuse does not cut it anymore. These people knew exactly what they were doing. Thats why it paid off so well. I must ask you Mr. Brooks...Please stop doing the business of the wealthy and try to address the concerns of the 90 percent who account for a pittance of the wealth. You speak for the few and need to take a salary cut yourself. Will you do it?
    Gregory Banks
    Tariffville, Connecticut

  75. There is no contradiction between nationalizing the banks and (to borrow your phrase) nurturing and recapitalizing what’s left of functioning markets.

    The purpose of a temporary conservatorship of the banks would be to recapitalize them as quickly and efficiently as possible and to avoid the outrage of unaccountable executives rewarding themselves for their incompetence with the proceeds of a taxpayer bailout.

  76. I find it strange that people refer to the instruments and mathematics that caused the current financial crisis as 'complex.' Or perhaps not so strange, since this his been happening for the last 2,000 or so years, with minor variations.

    In O. Henry's story, "The Man Higher Up", collected in the anthology The Gentle Grafter published in 1919, the basics of these instruments are described in detail: O. Henry's financier got rich selling worthless pieces of paper. The current solution is that, since our current financiers made their victims feel rich, they should be rewarded (except for Mr. Madoff, who gets to be their scapegoat for having failed to observe every, or for that matter any, tot and tittle of the law).

    In O. Henry's day (as in our own) the prevailing legal principle was caveat emptor, although sometimes the swindled populace engaged in an extra-legal retribution involving a rail, some tar, and a collection of feathers.

    ***

    I also studied the 'complex mathematics' employed in the swindle back when I was at university. It is called discursive mathematics, meaning, long, complex, impossible-even-for-mathematicians-to understand-equations that always end, 'Therefore, give us all your money. Q.E.D.'

    No matter how complex and impressive the discursive mathematics appears, it has no basis in anything remotely tied to the real world.

    Legitimate mathematical physicists, seeing no physical justification for such things as market momentum, remained in their physics labs. Discursive mathematical physicists helped sell investments by writing meaningless but legitimate-looking mathematical equations, and received huge sums in commissions (without the tedium of doing any real mathematical physics).

    And, just as they did in O. Henry's time, investors fell for the salespersons' patter.

    The solutions put in place by Roosevelt, but then discarded by Clinton and Bush, and currently being studiously ignored by Obama, seem to be simple and effective, except that these solutions would ruin all those members of the ruling classes who caused the current crisis, and it is clear that we cannot allow any of them (except Mr. Madoff) to suffer.

    ***

    The solution put in place by Roosevelt limited the size of banks, and the kinds of investments they could make. Since this part of the solution was abandoned in '98, we have a problem, but a soluble problem if we sacrifice those who caused the crisis.

    ***

    Given a loan for, say, $100,000, with all payments current, but with other borrowers defaulting, it might be (and is) the case that no one is willing to offer more than say $10,000. In this case, the bank is only technically insolvent, since it has deposits of $100,000 backed by the loan, now worth less than $100,000. But as long as all payments are current, this is a liquidity crisis, and the government should loan the bank money against the loan. Since all payments are current, there is no reason to believe the borrower will not, over the next 30 or so years, repay every penny.

    If, however, the payments on the loan have stopped, so the real value of the loan is $0 (though people will still pay something in the hopes that payments will restart), this is a solvency crisis, and the bank should be handed over to new (private) management, and the FDIC should make depositors whole.

    Since banks invested in instruments based on tiny pieces of thousands of loans glommed together like Frankenstein's monster, some auditing will be necessary (but we have plenty of unemployed accountants the government should be able to hire cheaply) to ascertain fair values for these these instruments (based on the probability of repayment), and declare the bank to be suffering from a liquidity crisis or insolvency, and then to take the appropriate action.

    Instead, the people who caused the crisis claim that, unless the government gives them trillions with no strings attached, we'll see a replay of '29; and, when the government listens, they're all made whole (if not their victims), plus they are entitled to their regular 0.1% commissions on every billion they sold the government on handing over.

  77. How about we say we got into this crisis because inbred oligarchs grabbed MORE power THANKS to the arrogant traders around the world that were playing a high-stakes game they didn’t understand - and EMPOWERED them further, making DC the accomplice? Of course regulation and ecological growth should go hand in hand: check Nobel prize winner Economist Vernon Smith (laureate article). Thanks for your thoughtful article and precious references.

  78. Hello,
    As a banker, I feel qualified enough to share my opinion on the debate greed vs stupidity. My view is close to yours : stupidity comes first - you could have added several other examples of how clever people misuse their intelligence. But the big problems rise when stupidity can run free. Thanks to active lobbying, the USA's financial regulation is one of the weakest in G2O countries. In Europe, subprime mortgage did not exist because they were simply not allowed ; AAA ratings on garbage CDOs would have triggered inquiries by markets regulators ; and insane levels of leverage in unsupervised institutions is impossible almost everywhere. In that sense, the crisis owes its roots to a stupidity that is internationally shared, but its detonator is indeed very American.

  79. "Never as ascribe to malice what can be more easily explained by incompetence."

    I don't remember where that quotation came from, but I have always regarded it as an idea to live by. It is more charitable, if nothing else.

    I don't find there is much difference in your two scenarios. Money is power; too much power in too few hands leads to trouble. Not because the powerful are corrupt or evil, but because they are self-interested. Success breeds overconfidence, which breeds carelessness and heedlessness.

    The solution is not to replace a private oligarchy with public one. The solution IS to smash oligarchies. Teddy Roosevelt (Republican) was a "trust-buster" and did not care for oligarchies.

    Capitalism tends naturally to concentrate wealth into fewer and fewer hands, because as the money piles up those in possession of it influence lawmakers to create mechanism to make their wealth more secure and easier to accumulate.

    Modern capitalism needs a counter-prevailing force, something to push in the other direction more effectively than nature does. This is what law and government must do.

    Big government is dangerous when it becomes the handmaiden of wealth and power (as it has lately been), as well as when it overpowers the private sphere (as in totalitarian regimes). Small government is dangerous when it is too weak to check the power of wealth.

    What's needed is difficult to obtain: a balance between the power of capitalism, which will always favor the few but is needed to generate wealth for all, and the power of law and government which should always be first concerned with the good of the many.

    Government and Business SHOULD be enemies, SHOULD be opposed to one another. But neither side should EVER be allowed to win that fight!

  80. Why should these narratives be incompatible? It is both greed and stupidity that led us to were we are.

  81. To quote Forest Gump, "Maybe it's both. Maybe both of them is happening at the same time." If that dimwit can come to terms with the complexity of life surely we know that our financial crisis had more than a single human failing behind it.

    You made a good start by identifying the greed and stupidity in the financial sector. I would add the myopia of our media's coverage of finance. The cravenness of our political leaders, from both parties. And last but certainly not least the gullibility of the American people.

  82. If you've been reading Kevin Phillips (Wealth and Democracy, Bad Money) and your colleague David Cay Johnston (Free Lunch) it's evident that this is both a candy mint AND a breath mint. It's also evident that stupidity in the form of ignoring inconvenient truths isn't confined to the arena of global climate change. Junk thinking and junk finance go together.

  83. Greed and stupidity are two sides of the same coin. Individual participants in the financial game should be allowed to be greedy and stupid as well as occasionally fair or intelligent. They should simply never be in a position to corner the market in such a way that their errors can crash the entire structure. I don't understand why Brooks is opposed to going back to Glass Steandahl and other reasonable regulation. Would he have pitchers calling their own balls and strikes ?

  84. One possible solution to the banking crisis would be to study the Canadian banking system which is considered the most stable in the world. It's a model that deserves more attention from its southern neighbor.

  85. I think this is a distinction without a difference. While Brooks may be correct in is parsing of the two narratives, the stupidity was motivated by....greed. And if the solution to either narrative is fundamentally the same, the only advantage to the stupidity narrative is moral absolution for the high-flyers, which most of us are going to be reluctant to grant.

  86. David - -

    Your usually lucid analysis obfuscates the key driver - - greed breeds stupidity!

  87. It's hard to see that banks are "too big." As a matter of fact, the number of banks and their aggressiveness suggest to me that they were in a very, very competitive market.

    You can't blame this mess on the size of banks.

    You can blame it on executive greed and stupidity (which in first instance) is the job of boards of directors to control. Boards ignored this though because applicable state laws no longer require directors, under pain of lawsuits for damages, to be as careful or intelligent as they once did about monitoring management. Under pressure from insurance companies and states like Delaware ( a so-called leader in corporate law) states have watered don drastically director responsibilities.

    You can also blame the SEC which in to failing to regulate greed/stupidity by letting shareholders vote on exec comp/bonuses also became captive of the companies it was supposed to regulate.

    You can also blame reulators like Volcker/Geithner on whose regulatory watch banks ran rampant.

    You can also blame senators (Dodd/Schumer)/representatives who took money hand over fist from banks and Wall Street rather than assure effective oversight.

    You cannot blame bank size. That is goofy.

  88. "Too many people were good at math but ignorant of history."

    This is it in a nutshell. Among other things, I'm a teacher. Among other subjects, I teach history. Take a good, cold, hard look at what our currciculum has stressed for the last 30-some-odd years. Take the same look at what districts from sea-to-shining-sea are promoting now in their "reform," paying special dividends to math and science teachers while leaving the humanities to wither on the vine.

    When this all started, those of us in the humanities tried to warn the cabals of village idiots in control of the system what this would lead to if we did not teach the children something about the nature of the world they would inherit, something beyond the cold certainties of math and science. We weren't listened to then and we're not being listened to now.

    This catastrophe we are confronting at present is in no small part due to this fallacy of what is important in education. Here on the front lines of the future, we grunts in the trenches see only an officer corps still mired in yesterday's thinking.

  89. "It’s that overconfident bankers didn’t know what they were doing. They thought they had these sophisticated tools to reduce risk."

    Do you believe in the tooth fairy as well?

    Simon Johnson has a wide array of experience; I find his argument compelling. You are just a pro-business shill and speak within the narrow confines of your imagination.

  90. Come on. They were in the seats of world financial and economic power and did not have a clue as to what was going on?

    Sorry, I think the greed story is far more persuasive. Make a profit on paper, pocket my great salary and benefits, recycle the worthless paper again for another round of profit.

  91. Why fall into the trap of binary thinking? Do you have to exclusively attibute the financial mess to one theory or the other? Sometimes things are more complex than they seem.

  92. There is more to this than simple greed. There is something like Gresham's law involved here: Bad investments drive good investments out of circulation.

    This happens because the bad investments yield higher returns for the investor, for the bank, for the investment broker. Investors go where the money is. Why settle for less when you can have more?

    The cautious bank will quickly lose its customers and its most talented employees, who will follow the money elsewhere.

    Government regulators, assuming that they are not in bed with the financial institutions, do not have this incentive. They can be rewarded for enforcing the regulations.

    The real problem (along with the weakening of regulations )is that the financial foxes have acquired an exclusive contract for guarding the hen house.

    Unfortunately, Pres. Obama has done nothing to change this as is seen by his key appointments: Timothy Geithner as treasury secretary and Larry Summers as director of the National Economic Council.

    His plan to save the banking system by allowing the speculators who caused the financial crisis to speculate their way out of it with government backed loans is also hardly reassuring.

    Too bad for those voters who believed the campaign talk about "change."

  93. Who's to say its a binary choice. Stupid and greedy go together just like chocolate and peanut butter.

    And one often begets the other.

  94. Arguably there's a third strand in the narrative. In the U.S. we substituted the pursuit of money for the pursuit of wealth. In other words we ignored wealth-creating investments in new industry, infrastructure, and education, in favor of the short-term pursuit of higher returns on our money.

  95. Mr. Brooks: If you read Matt Taibbi's funny, incisive and exhaustively researched article on the credit crisis in the current issue of Rolling Stone ("The Big Takeover" -- it can be viewed online), it might cause you to rethink your final conclusion.

    Mr. Taibbi points out the stupidity and greed going on in financial circles (especially in the Financial Products division of AIG) in excruciating and hilarious detail, but his final conclusion is that once again the Wall Streeters have succeeded in protecting themselves at everyone else's expense.

    The article is written in the vernacular of Rolling Stone's target audience -- the young, the restless, and the profane, but you won't find a better explanation of just how we got into our current financial mess anywhere.

  96. Stupidity follows greed like a puppy following a child - only not near as innocent. Greed dulls the senses. With bigger banks and obscene individual earnings short replaced long sightedness. We need smaller banks and more regulation - unless you're greedy.

  97. Tim Connor is correct, Mr. Brooks. You are an apologist and it would be interesting if your column began with a full disclosure. Why should we lend any credence to the ideas of individuals and institutions that have produced a 'stupidity narrative'?

    Your column reflects discomfort with taking responsibility: 'Banks got too big to manage. Instruments got too complex to understand' as if somehow they did these things magically by themselves. 'Too many people were good at math'? Or perhaps they knew what they were doing and didn't care about the consequences given their fat salaries and bonuses.

    There is also an interesting semantic shift as you sum up how each side would respond: 'The greed narrative leads to the conclusion that government should aggressively restructure the financial sector. The stupidity narrative is suspicious of that sort of radicalism. We’d just be trading the hubris of Wall Street for the hubris of Washington.'

    Huh? 'We'd just be trading?' You make your alignment clear, but you leave me trapped between Scylla and Charybdis. According to you, I cannot trust my government. The actions of Congress, the previous administration and Rod Blagojevich make it clear why. Meanwhile, what more appropriate metaphor for Wall Street than a voracious, sucking whirlpool? Even so, I've always known the latter was a potential danger.

  98. The incredible growth of the financial sector you mention is perhaps directly proportional to our losses in the manufacturing sector. Our best (and greediest) minds followed the easy money while American industry was scrapped.

  99. David,

    After saying in the beginning of your column you agree with him at the end when you say we can agree that banks and investment houses got too big. Therefore they should be smaller and go back to performing discrete functions. That sounds like regulation to me.

    I tend to agree with Johnson. I believe it is the nature of capitalism (as history shows) to gather as much power as possible to the point of monopoly. While dynamic, capitalism has shown it needs to be regulated to function properly.

    Banks, investment houses, and insurance companies would serve the country better if they were small to medium sized, were heavily regulated, and went back to performing discrete services to people they know.

  100. I don't think it so necessary to choose between the greed and stupidity narratives, greed and stupidity are not mutually exclusive. The stupidity proponents should understand that regulation is not hubris and that regulation, and decentralization is not some sort of radically aggressive restructuring. It is common sense, and equally needed and reasonable whether the fault was either greed or stupidity.

    Brooks writes: "We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand."

    This rather false choice is easily fixed by saying: "We got into it because greedy, arrogant traders around the world were playing a high-stakes game they didn’t understand."

  101. Honesty always wins in the end. For 8 years the media and Law makers have lied openly to Americans. The World Leaders knew it but it took Obama to admit the cause started with the GREED of American Polticians, Wall Street and Banks as they drew in others from around the World. Little was reported about how Bush didn't even know what the G-20 Summet was and Hank Paulson was clueless about Economics. This is why the World Leaders waited for Obama to take office. Still the Media condemned Obama as a failure before the Summet even started. Like John Kennedy, President Obama had to gain the trust of the US which was lost because of 8 years of lies by the Bush Administration. I noticed how nothing was said when Bush ran our US Debt up to 11 Trillion dollars, but quickly the GOP and Media jumped on Obama for trying to fix the mess. If nothing elese the World showed why the United States is ranked so low in education, as Americans are still feed lies/spin on how the Stimulus works. Good news is all the Republican Govenors who said they refuse to accept the money for their States have now accepted it. Sarah Palin was so funny as she publicly refused the money and secretly accepted it. Govenor Stanford the last GOP hold out caved in. Even if the US doesn't see it or even accept it we now have a President that we can be proud of. No more igorant Bushisms or drunk President that the Media covers up for. I do understand why President Obama is very selective on who he speaks to in the Press and Media as the Bush Administration still has moles in place to bring down this country and our President. The enemy we should have feared the most was the Bush Administration and now we have to fear and watch those placed as moles to continue the mission.

  102. Has it occurred to Mr. Brooks that greed and stupidity might have combined to help create this mess? There's nothing mutually exclusive about them. Just the opposite.

    Moreover something even more fundamental is at work here. We humans have used the powers we've acquired mostly to continuously increase our numbers and our works. By so doing we increasingly overwhelm the resources and waste disposal capacity afforded by the natural world and depend increasingly on more and more complex technology and organization to keep the whole enterprise going. That ever more complex technology and organization has made us ever more vulnerable. It was complex financial instruments---CDOs, MBSs, derivatives, and such that most obviously created the vulnerability that led to the present collapse. And the same deep causes will crop up elsewhere soon enough---in global climate change, global epidemics, or a dozen other forms---unless we face the reality that endless exponential growth and ever-increasing complexity are unsustainable and lead to ever deeper crisis.

  103. Um, bankers were "playing a high stakes game they didn't understand" ??? Or was it that they didn't care to understand as long as the dollars were rolling in. The "ignorance" theory lets the bankers off way too lightly. If you think greed wasn't a factor, you're crazy. Morality is staring you in the face...

  104. greed and stupidity have constantly been with human beings since times immemorial and will remain with us well into the unseen future.they do not explain the longest recession in years.

    the root cause for the financial crisis was the excessive gambling by wall street,washington d.c and home buyers who could not afford large mortgages(and others who used their homes as piggy banks).home prices in places like ca. went up for over ten years.the dow jones rose for years. the rise in stock prices and home values was not sustainable.at some point the laws of gravity had to take effect. but banks,some home-buyers and d.c remained blind to the looming correction in stock and home prices. 401k stock funds dropped by 50 percent in value. fund managers did nothing to prevent the carnage. wall street misled investors by pointing to long term growth of the stock market.the past is not a predictor of the future and wall street can never be trusted.

    banks and homeowners will have to return to their roots by lending,borrowing and investing prudently. d.c must promote sound market policies and practices. only then will the crisis end. the low mortgage interest rates and falling home prices may offer people a once in a lifetime opportunity to reduce mortgage debt and buy a home that was unaffordable a few years ago.

    the financial market may however not return to normal functioning for years.

  105. David,

    Basically, Wall Street is guilty of inflicting tremendous damage to this country -damage that no terrorist organization has ever done to our country- and Wall Street and their accomplices, did it either out of malice or out of incompetence, and what you are saying is that you choose to believe that they did it out of incompetence? that they didn't know what they were doing?.

    The fact that you are very forgiving in your appreciation of the motives behind the crisis is due to subjective reasons, not objective analysis, and it is the latter the one that will help us prevent something like this from happening again, for the sake of future generations.

    Yes, this same thing has happened already in several other countries, with corrupt governments, where the oligarchs rule.

  106. Actually, it's a combination of greed and stupidity. Mortgage origination (sales) has been, over time, separated from the ultimate owner of the risk (securities holder) through the process of securitization. The banks that bought these securities were stupid: they assumed that the quality of the underwriting process was the same as when they used to underwrite these loans themselves. The originators were greedy: they began to push unqualified borrowers through the underwriting process, fraudulently completing forms (or even dropping the requirement for proof of income, etc.)

  107. Bottom line since the Reagan era we make nothing and have become money changers. The two biggest reasons are our under taxed wealthy and decline of the manufacturing sector which leads to the decline of the middle class. This is not rocket science Mr. Brooks when investors pay low taxes on capital gains they will put it in riskier and riskier assets. When investors had hard earned money that was taxed appropriately they minimized risk and capitalized in concrete areas of the economy like building manufacturing plants.

  108. Mr Brooks:

    You put the oligarchs on the hook early in your piece but let them off at the conclusion (in favor of global traders over whom we have no control [or do we?]) You're being your usual slippery self.

    A "transparent, straightforward, and comprehensible" American finance system? Please. Don't insult my high-school level intelligence. It will never happen. You will no longer support any such notion once we recover. You will say, "That was then and this is now" or "What I said was not what I meant."

    Both schools of thought believe that banks are too big? As in "Too big to fail"? That's OK. Let them be big. An old friend of mine had a simple response to the problems of excess. Act like a fool when you drink? Then DON'T DRINK! You're a bank or a big insurer who is too big to fail? Then DON'T FAIL!

    A very transparent, straightforward, and comprehensible approach, as well as seeming to be very CONSERVATIVE, as you would have it.

  109. Of course David, it was all just an honest mistake. Those tens of $millions in bonuses had nothing to do with it. I mean really, who could have guessed that personal debt - greater than at anytime since 1929 - would cause such trouble?

  110. Mr. Brooks: You can't possibly be so naive as to believe that "oligarchs" would have no interest in "grabbing power." As a class, that is their very raison d'etre, their most salient defining characteristic. As for the rest of your argument, I believe that you overlook the obvious: there is no contradiction between your two possible narratives; greed and stupidity on the part of many so-called financial services professionals have acted hand in hand to create an economic meltdown the likes of which we've never seen, essentially proving that trickle-down works mainly in reverse.

  111. What a surprise! Brooks concludes that there's no need for fundamental change in our financial institutions. We can go on just as we have, but with a little more sunshine.

  112. I'm of the school that greed fed the stupidity or put another way fed a willful ignorance of financial actors of the consequence of their actions. After all these for the most part were smart (or at least slick) guys and gals. An arrogant attitude by an entitled group in society, not just in the financial sector, which fed a number of Quiet Coups, not just financial,during the Bush-Cheney years.

    With one more major terrorist attack on American territory with Cheney in office and a "perfect storm" of intelligent stupidity (to use Eckhart Tolle's felicitous term in A New Earth) might have occurred-- not amenable to the intelligent remediation of an Obama Administration, which probably could not be elected in those circumstances.

    My point being that many reasonable folks like Brooks still seem blissfully, if willfully ignorant of how close we came to a perfect storm of dysfunctional power at the top and the consequences that the country would have to pay if intelligent stupidity had full rein. Here, the culprit is not just greed, although it played a very large part in motivation, but intelligent stupidity, an ideological blindness to consequences of power for power's sake, gain for gain's sake, electoral winning for winning's sake, that nearly wrecked the American system. Which thankfully (and luckily) got a reprieve under normal constitutional circumstances. Reversing the unintended consequences let lose under the ill-advised (and probably unconstitutional) decision of the Supreme Court in Bush v. Gore. Apparently, there is no institution no matter how elevated that is immune from the virus of intelligent stupidity.

  113. Mr. Brooks bases a whole column on a false dichotomy, designed to cover for the reckless, stupid and greedy actions of the class he's always stood up for. That his favorite theory comes right out of the American Enterprise Institute is only logical, as is his desire to whitewash the actions of the rich elites at whose trough he's been eating for the last coupla decades.

    Mr. Brooks has always been a reliable purveyor of the same ideology as people like Hugh Hewitt and Rush Limbaugh. That he does so with better grammar and less frothing at the mouth doesn't change anything about the actual content.

  114. It is not a question of opinion whether or not the banking industry deregulated itself through a thorough pollution of government regulatory bodies and the use of lobbying firms in Washington. Therefore, there was little "uncertainty" that the financial industry's self-reliance would eventually result in disaster.

    Your contention that bankers should simply train themselves to be historians is perfectly demonstrative of the classic problem with your consistent belief in the possibility of a free-market utopia. We do not live in a world where people, kept alongside an institutionalized incentive to make as much money as possible whatever the costs, will somehow produce a positive collective economic outcome. It is patently absurd to say otherwise, particularly for those with a knowledge of financial crises throughout history. Regulation is a placeholder for the self-restraint you so quickly assign as the solution for the individuals holding economic power. All the transparency, straightforwardness and comprehensibility in the world will not solve a structural deficiency like trusting bankers to maintain a sustainable risk structure when they are given no bounds. As much as you refuse to admit it, structural forces play a much larger role in our individual and collective path than any striving towards individual virtue does. That being said, structural problems require structural solutions. That is why "liberal" regulatory regimes governing Wall Street and the global economy are the only way to resolve this financial crisis and prevent its repetition. If the G-20 summit is any indication, a global regulatory regime has begun to make its way into international practice. "Preserv[ing] the essential market structures" will not be possible. Free-market utopianism got its shot, Mr. Brooks, and Wall Street blew it.

  115. Greed and stupidity aren't mutually exclusive, certainly not in high finance. Why then does Brooks think one cause more responsible than the other? Rather, the same arrogance that accompanied and facilitated unprecedented greed may also have kept the bankers from admitting -- even to themselves -- that they didn't know what they were doing. Then again, if they were really that arrogant, it's also possible they didn't *care* whether or not they really knew what they were doing as long as they got their bonuses (because, among other things, they felt no penalty for being incompetent or wrong over the long term).

    So yes, it's VERY possible that the causes can fairly be described as "all of the above," and the cure proposed -- especially in terms of re-regulation -- had better take all that into account. Which means you phrased the question the wrong way in posing it as either/or and stopped in your analysis too soon, David. Do better next time, eh?


  116. Mr. Brooks is smart apologist for the greedy, selfish, arrogant Wall Street tycoons who enrich themselves with smart financial devices to the detriment of the country and whole world.

  117. Oy! Such academic and pompous theorizing. It's not either Greed or Stupidity. It's both and more, including ego, bragging-rites, self-delusion and denial, a dog-eat-dog rough-sports mentality, and--most of all--who gets to build a bigger house and own a fancier car.

    I worked at the top on Wall Street at one of the most reputable firms. I am proud to say I got fired by a manager for refusing to facilitate an unethical practice. I can tell you first hand that The Greedy generally did not understand the repercussions of what they were doing, but neither did they care! They lose sleep over who will get the bigger bonus or recognition, who will swagger more into the country club over the weekend.

    So long as they got away with any crazy scheme or inside deal with a patina of legitimacy and corporate cover, and so long as they could avoid direct responsibility and risk themselves, they didn't and still don't give a hoot who they hurt or what the eventual result of their profit-taking are.
    I find editorials and theories like this to be the product of too much education, not enough experience in the field, and a need to fill column with faux-sagacity.

  118. The dichotomy between greed and stupidity that Brooks describes is false. Obviously, to create a catastrophe of current proportions you need to have greedy people acting stupidly. The problem is that in today's financial system greedy people have no incentive to act intelligently (or un-greedily), because they are not personally liable for covering their own lucrative but risky bets. Greater transparency will only help if the system of rewards and punishments is reformed, in the form of regulation backed by criminal sanctions, enhanced shareholder powers commensurate with shareholder risk (or return to private ownership of banks), and government oversight commensurate with government supports.

  119. David Brooks is always loyal to his masters. Now he chooses to paint them as stupid rather than greedy. The unwashed public are mad as hell with the greedy barons. But if the Wall Street gangs are village idiots, how can The People be so angry? Nice try.

  120. Your description--that there are these two school of thoughts that cause the financial fiasco--is not mutually exclusive. Even if both are true they don't contradict each others. In that sense this is a typical David Brook column: to simply things and to oversimplify things, and provide false choices for the reader.

  121. The thought on Wall Street was to make as much money as possible in the shortest amount of time and be gone before the house of cards fall.

    If you had to devise a financial instrument to accomplish this you couldn't find a anything better than a no money down teaser subprime mortgage with a reset in three to five years.

    Also your scheme happened to be in perfect alignment with both political parties goal of home ownership.

    The final cog in the money making machine was to use AIG insurance and the rating agencies to sell your bad loans as AAA+ securities.

    It was evil genius ... making huge amounts money by lending to poor people.

    Put me down in the Greed column.

  122. The current financial crisis is the result of neither greed nor stupidity – it is, as Mr. Brooks himself hinted, the result of a synergistic combination of both. That the masters of the universe were active as plutocrats, directly, indirectly and greedily, is obvious. Equally obvious is their stupidity. That groupthink increased with the increase in faster and more universal communication should be no surprise, especially as centralized power (financial=political) breeds obedience, and contrarians become marginalized.

    The proletarian shouts demanding the kings' heads are perfectly reasonable and justified. Yet, even as the heads fall away from madame guillotine, they plot their own reconnection to their bodies of power and the early shouts of "long live the kings" can be heard. If we, the common citizens, are not ourselves to be accused of stupidity, then we will demand an end to kingdoms, once and for all, we will demand the dispersal of wealth and the breakup of unaccountable centralization.

  123. Mr. Brooks
    Your very intellectual approach to the problem of the financial crisis misses the point. The financial markets are based upon credit, from credere, "to trust." In good times, it's easy to trust everyone, for money flows as people expect. But in bad times, people, banks and other institutions stop paying because either they can't or they want to protect themselves. Then there is no credit.
    We allowed financial institutions to gamble and to do so with instruments they themselves didn't understand. Worse, there was no human responsibility in place. Responsibility was transferred to computers, programs and algorithms. If something went wrong, blame it on the program.

    So here we are today. No one trusts anyone else... thus no credit. It's not a grand scheme that got us here, for the most part (excluding genuine crooks like Madoff). It was greed and the lack of character of those in positions of power, for the past 8 years. When a man would rather be known as rich or powerful than honorable, there is no foundation for trust.

    We have allowed a whole generation of avaricious people to rule us and inspire us to be greedy. Not only did supply-siders let a pittance of their wealth trickle down upon us, their base morals did also. As they built their palaces, many of us have used their same moral paradigm to obtain our cottages, cars and chachkas. A much smaller version of their dream became ours. And in order for the supply-siders to fuel their dreams, they encouraged all of us to join them in overspending, over borrowing and in some cases far over reaching what we could afford. This was not only the illusion of prosperity; it was the reality of profligacy.

    The solution? A return to the value of virtue, moral excellence, in which the honorable way we treat each other is more respected than how much we can scam each other for our own gain. Until an entire society returns to that attribute instead of greed as its primary focus, you may offer many remedies, but all will fail. If a society only produces people who want to amass wealth at any cost, its most talented will be the most predatory, as we have seen. We have created gods of consumption and now many bow down before them. But finally, the curtain has gone up and we see the shimmering mirage dissipate.

  124. Thanks for your continued insightful analysis and commentary, David.

    "To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand."

    I'm still trying to see the contradiction between those two world views... They seem very similar to me. Do we have to choose? Can they not both be true? Because I agree, strongly, with both analyses.

    I even think they need to go hand-in-hand. Oligarchs don't go out of their way to sow the seeds of their own downfall, it happens because they don't understand the implications of their own foolish actions, but find ways to stifle the dissenting voices that could have saved them...

  125. If governmental supervision of casinos stopped and the word got out the owners were fixing the roulette wheels and dealers playing cards from the bottom of the deck would people keep going there?

    Wall Street without supervision has been dealing from the bottom of the deck by front running, insider trading, hyper leverage, accounting scams, Ponzi games, etc.

    Now the financial people are telling us that yes they did cheat but they are they only ones who know how to run a casino so they should be allowed to keep their jobs and business with the promise they will not do it in the future but they want to keep all the money they cheated the players.

    Do you want to believe them?