FTSE 100
Dow Jones

Thursday, 17 February 2011

How it all fell apart

A commenter asked why I am not doing so many financial stories, and the simple answer is that there aren't so many stories of greed and excess at the moiment  When the tide goes out we see all sorts of flotsam and there mabe some Ponzi schemes and the like on the go at the moment, but don't expect to see them blow up until just before the next big crash.

So most of the big stories are still about Madoff, Goldman and AIG, and the tales are all about the time just before the big bust, so here's another. In the past, I have blamed Tie Rack for the UK banking crisis, and I stick by my analysis, but that doesn't explain the failure on Wall Street.  Michael Lewis blames women, mostly.

Financial Crisis Cause No. 1: Wall Street’s shifting demographics.
In the commission’s report Federal Reserve Chairman Ben Bernanke describes recent events as “the worst financial crisis in global history, including the Great Depression.” The event, in other words, was unprecedented. To understand an event that has never before occurred, we must logically begin with those factors that have never before been present. On Wall Street, the most obvious such factor is women.

Of course, the women who flooded into Wall Street firms before the crisis weren’t typically permitted to take big financial risks. As a rule they remained in the background, as “helpmates.” But their presence clearly distorted the judgment of male bond traders --- though the mechanics of their influence remains unexplored by the commission (on which several women sat).
They may have compelled the male risk takers to “show off for the ladies,” for instance, or perhaps they merely asked annoying questions and undermined the risk takers’ confidence.
At any rate, one sure sign of the importance of women in the financial crisis is the market’s subsequent response: to purge women from senior Wall Street roles. 

Sounds crazy? Not really, as I pointed out before, credit derivatives were pioneered by Blythe Masters  at J.P.Morgan.

No comments: