Excerpt from COMPLICIT: How Greed and Collusion Made the Credit Crisis Unstoppable, by Mark Gilbert with permission from the publisher Bloomberg Press (February 2010). Part 1 of 2By Mark Gilbert, London bureau chief and global capital markets columnist for Bloomberg News.
Where did the money come from? Where did it go? How was thisallowed to happen? Who is to blame? These are the key questionssurrounding the credit crunch that has engulfed the global financialsystem. The answer, in part, is that there wasn't anywhere near as muchmoney as there seemed to be. And because it didn't exist in the firstplace, the money hasn't gone anywhere. It was all an illusion, althoughthe economic consequences of its disappearance turned out to bevery real indeed. As to how it was allowed to happen and who is to blame, in asense the honest reply is that we all allowed it to happen, and we'reall to blame, either as active accomplices or complicit bystanders.Society as a whole made a collective, unconscious decision to allowthe banking system to grow unchecked because the tangible benefitsthat seemed to accrue from unbridled capitalism outweighed theintangible hazards that might accompany this dangerous test ofcapitalism's limits. The global financial authorities -- the elected politicians who decreethe legal framework within which finance operates; the unelectedcentral banks charged with tending the economy, the regulators responsiblefor creating and enforcing safety rules; the money managersentrusted with nurturing the future incomes of widows, orphans, andhordes of other savers; and the people paying themselves millions ofdollars to run the investment banks -- all looked the other way. Theyoperated under the belief that the monetary benefits accruing tosociety from incessant, unprecedented, and essentially unregulatedgrowth in the securities industry more than outweighed any of theattendant risks. In other words, the financial community, through a deadly combination of greed and hubris, fouled its own sandpit.