The Financial Crisis & The Collapse Of Ethical Behavior
We featured a link to this paper in tonight’s value investing links. However, I think this paper requires an individual post. If your interested in learning about the ethical conflicts within the financial industry read on… Click Here To Skip The Introduction & Full Paper On The Collapse Of Ethical Behavior
Article Introduction (Via Greycourt)
Most assessments of the financial crisis that began in August of 2007 identify as the source of the problem such issues as poor risk controls, too much leverage, and an almost willful blindness to the bubble-like conditions in the housing market. Well, maybe. These issues were certainly the proximate causes of the crisis we find ourselves in, and if only one or two firms had drunk the Kool-Aid – a Drexel
Burnham, let’s say, or a Long Term Capital Management – we could buy the usual nostrums as the full story.
But we suspect that the financial firms and their executives aren’t quite so collectively stupid as this explanation would imply. We think there was something else going on, something that allowed intelligent people to persist in unintelligent behavior. In our view, poor risk controls, massive leverage, and the blind eye were really symptoms of a much worse disease: the root cause of the crisis was the gradual but ultimately complete collapse of ethical behavior across the financial industry. Once the financial industry came unmoored from its ethical base, financial firms were free to behave in ways that were in their – and especially their top executives’ – short-term interest without any concern about
the longer term impact on the industry’s
Article Excerpts (Via Greycourt)
“By a collapse of ethical behavior we mean exactly what we say – that the actions of many, if not most, of the large American financial firms (and of the many foreign firms that succumbed to the “American disease”) would strike an ordinary person as unethical – repulsive and scurrilous”
“We also mean something more specific to the long-term viability of the financial industry, namely, the disappearance of any sense of fiduciary responsibility to the ultimate client”
Click Here To Read A Full Paper On The Collapse Of Ethical Behavior
