Has Greed Become Good?

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This is a review of a book that chronicles the crises in the financial system since the 1970's. It tells a story about the key players that have turned Wall Street banks away from their primary function of allocating savings to their most productive uses, into a system that maximizes executive compensation by taking excessive risks with the assurance that government will backstop loses. Our recent financial crisis is simply the latest greed inspired crisis that required government compliance and government rescue operations. In that sense, it reminds the reader that financial crises have been built into the system. We should not expect that efforts to reform the financial system will prevent the next crisis.

One of the problems with the book is that it places greed at the center of the crises. This is a problem in couple of ways. Greed is a human weakness, and good systems of governance and accountability should recognize human weaknesses and establish systems to counteract them. The focus should not be on greed but on weaknesses in corporate governance and accountability, as well as the compliance of government officials who establish, and enforce, the rules by which the game is played. Nevertheless, it is also probable that changes occur in our culture. Perhaps the response to greed in our culture is more favorable than it has been in the past. We should try to understand how cultural attitudes may have changed such that financial success has become a goal, independent of the manner in which it has been achieved.