The real causes of the so-called financial crisis
Saturday, February 19, 2011; 3:44 PM
A surprising number of my fellow citizens appear to be unaware of my service these past 18 months as a member of the Financial Crisis Inquiry Commission.
Thus it may come as news that I have declined to sign the report issued by the majority, or the dissent by the three-member minority, or even the dissent from their dissent, written by the now-immortal Peter J. Wallison. I hereby dissent from the dissent from the dissent. My dissent is different from the others, which is why I am dissenting.
I do this, of course, not to call attention to myself.
Still less do I seek to enhance the status of my application for employment with J.P. Morgan Chase. I seek merely to inform the general public of the true causes of our so-called financial crisis.
The task is not a simple one. In limiting me to a mere two pages at the end of their 633-page book, the majority and other dissenters have suppressed not only several apt metaphors, but deep truths.
Here, in a brief executive summary, they are:
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. Wall Street's gender problem is, for the moment, of merely academic interest. Less academic is . . .