No Financial Villains…?

“But financial meltdowns don’t offer villains, for the simple reason that no one person or even one group is powerful enough to take down a whole system.”

Megan McArdle

I don’t really get Megan McArdle when she makes a statement such as the one above. It was in an article critiquing Matt Taibbi and defending Goldman Sachs.

Um, Megan, I am going to have to beg to differ with you. There were many, many identifiable villains who through their own action and inaction, helped create the crisis. There were people who remained slavishly  devoted to an outmoded and disproven ideology, which led them to decisions that were indefendable. Some people engaged in utter recklessness when it came to risk management, or such gross irresponsibility that they are not merely morally culpable, but legally also. Then there are those regulators who gave the corporate interests they supervised pretty much everything they asked for.  And of course, the people simply trying to grab a free lunch contributed mightily to the collapse.

I have 322 well researched pages that shows as much.

Goldman Sachs was but one of the 5 biggest investment banks that requested from the SEC, and received, an exemption from the net cap rules. This allowed their leverage to balloon from 12-to-1 to as much as 40-to-1.

As a nation, we need to stop pretending this is “too complicated” and start holding the responsible parties accountable . . .


Originally published at The Big Picture and reproduced here with the author’s permission.

6 Responses to "No Financial Villains…?"

  1. Guest   July 13, 2009 at 3:56 pm

    Short and to the point, and absoutely correct. Just because, as Minsky (1986) laid out in predictive analysis, during periods of stable growth it is inherent in capitalist economies that credit-based finance becomes loose, then excessive, then reckless, it takes real people knowing pretty much exactly what they’re doing to carry it out to its final destabilizing conclusion.

  2. Guest   July 14, 2009 at 9:18 am

    It is outrageously astonishing that in her desperate attempt to defend Goldman someone like Megan McArdle, could blatantly make such a silly statement that, “But financial meltdowns don’t offer villains, for the simple reason that no one person or even one group is powerful enough to take down a whole system.” After two long years in the Global Financial Crisis, any layman who has followed the RGE forum can easily identify obvious villains but not Megan. How weird….? Most of all, she has not furnished any solid data/evidence to debunk Matt Taibbi’s article despite her ferocious attack. Anyway in life there are always people who earn a living through dishonest reporting.

  3. paul94611   July 14, 2009 at 8:22 pm

    As a nation, we need to stop pretending this is “too complicated” and start holding the responsible parties accountable . . .HahahahahahahahaAs long as there are whole segments of society for whom the rule of law does not apply then the true nature of America has been laid bare. America is a nation where the rule of law no longer rules.I submit the following mathematical formula to encompass the American economy.Authority – responsibility = chaos.

  4. Guest   July 18, 2009 at 2:08 pm

    This is an fun post! Even the comments are intelligent. Mr. Ritholtz ur cute and direct and I am impressed with your comments.To be honest there are no villains, what happened were two basic concepts, pseudo economic growth, in the instantaneous amount of billions in circulation of money around the world. How many times was $1 borrowed, invested, made, then borrowed, and invested again 7-8 times, that is just U.S then convert that to transition to other countries around the world, how many times did it circulate in 2006-2007? Trillions of dollars, and they kept pumping enormous amounts of money to fuel this pseudo growth. The entire system was a long string that just required a little tug from the original holder. The ironic part is that we were headed for a recession since 1999. And the gov. could of made one tiny little difference that would of made the entire situation a whole lot better, when the dollar was rising in 2006, they could of lowered interest, grown the money supply and keep the dollar stable, thus keeping property prices from falling so low, that trapped many home owners.If one were to say there were villains, then when does the list of villains end? The thousands of loan officers that pushed horrible products? Well, they are all unemployed now, or in dead beat jobs, so are they just victims as well? Who are the villains, CEO’s that answer to pressure to make profit? Share holders that want to retire? Economists that are paid to report everything is dandy? An administration that has an ideology to shrink government as small as possible, cutting services and jobs, and raising the deficit to pay for a war that secures oil interests? This caused the bubble in real estate. Who is a villain, when everyone was just following their circumstance. For me it is not a finger pointing game of who was bad. It is the notion of slow reacting leadership. But that dosent make a villain. All in all it was handled pretty well. We were breaking records, lows that were not cracked since the 1930’s and now indicators are showing some improvement. I think we navigated around tsunami waters.

  5. XRayD   July 18, 2009 at 6:19 pm

    The Man Who Crashed the Worldhttp://www.vanityfair.com/politics/features/2009/08/aig200908