Industrial-Strength Denial by Barbara Freese

Author:Barbara Freese
Language: eng
Format: epub
ISBN: 9780520296282
Publisher: University of California Press

7

“Bottom Line. Nothing Else Matters”

THE FINANCIAL CRISIS AND A CULTURE OF EXPLOITATION

“We are all here to make as much fucking money as possible. Bottom line. Nothing else matters.”

—email from Ameriquest manager to sales force selling subprime loans

In 2008, the world was thrust into the greatest economic crisis since the Great Depression. In economic terms, it caused trillions of dollars in losses. In human terms, it caused tremendous suffering, as millions of people lost their homes, jobs, and life savings. And without an extraordinary and costly effort by the government to prop up the collapsing banks and markets, the impact would have been vastly worse.

The turmoil was triggered by the bursting of housing and credit bubbles, which crippled a global financial system that had become dangerously dependent on high-risk subprime mortgages deceptively packaged into supposedly low-risk securities and derivatives. These financial products hid, amplified, and concentrated financial risk until it inevitably detonated, triggering the global crisis.

The crisis was fueled by broad changes in the incentives, norms, and government oversight of the financial services industry, creating a dangerous culture of runaway greed, recklessness, and exploitation. And both before and after the crisis, there was plenty of denial of the obvious.

This chapter is about how the financial industry (and regulators) denied the existence of a housing bubble, denied the risks of historically lax lending standards and rampant mortgage fraud, denied the dangers of investment products so complex nobody really understood them, and denied the need for regulations to curb the rising risk taking. It is also about the particularly corrupting influence of money on the mind and about how industry members have avoided feeling too badly about causing this global crisis.

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