Financial crisis began with pure evil
The financial crisis seemed to many to develop from nothing and come out of nowhere. But, as economic historian Niall Ferguson has written, it had a sinister cause:
We know from the hubristic emails of the Goldman Sachs trader Fabrice Tourre just how out-of-control things were on the eve of the financial crisis. Tourre positively gloried in selling the quintessential toxic assets – “synthetic abs” (asset-backed securities) and “cdo2s” (collateralised debt obligations “squared”) – to “Belgian widows and orphans”, knowing full well that the subprime mortgages on which these assets were based were already “totally dead”.
“More and more leverage in the system,” wrote “Fab” to a girlfriend. “The entire edifice threatens to collapse at any moment. Only potential survivor, the fabulous Fab… standing in the middle of all these complex, highly levered, exotic trades he created without necessarily understanding all the implications of those monstrosities.”
“Anyway,” he went on, “not feeling too guilty about this, the real purpose of my job is to make capital markets more efficient and ultimately provide the US consumer with more efficient ways to leverage… himself, so there is a humble, noble and ethical reason for my job amazing how good I am in convincing myself !!!”
With its sly winks and surplus exclamation marks, Tourre’s email perfectly encapsulates the spirit of the age – an age in which clients were merely “counterparties” and conflicts of interest were there to be “embraced”.
It seems to have been a combination of monumental incompetence on the part of governments, central banks and regulators and, as the above email shows, pure evil.
