Tensions Between Economic Policies, Technology and Bankers’ Professional Perceptions
‘Risk management can never achieve perfection.’ Alan Greenspan, former chair of the US Federal Reserve (the Fed) wrote this after the credit crisis broke. He still has faith in risk management, saying problems lay not with regulators’ inaction, but with the people using products like derivatives, who became ‘greedy’ and dishonourably peddled them. He implies they lacked the integrity and reliability of ‘the pharmacist who fills out the prescription ordered by our physician’.1 This typical moral argument embodies one of the tensions explored here. The logic is that technical risk models would be perfect were it not for their abuse by people.
KeywordsMonetary Policy Central Bank House Price Federal Reserve Pension Fund
Unable to display preview. Download preview PDF.
- Bank for International Settlements (2008), ‘Basel II’, www.bis.org, downloaded 10 November.
- Basel Committee on Banking Supervision (2000) ‘Credit Ratings’, Working Papers 3, Basel: BIS.Google Scholar
- Bell, D. (1976), The Coming of Post-Industrial Society, New York: Basic Books. Berman, S. (2003), ‘We Didn’t Start the Fire: Capitalism and its Critics’, Foreign Affairs, 82(4): 176–81.Google Scholar
- Bogle, J. (2003), Statement to US Congress: 12 March 2003, Washington, DC.Google Scholar
- Creswell, J. and Bajaj, V. (2007), ‘$3.2 Billion Move by Bear Stearns to Rescue Fund’, New York Times, 23 June. Economist, The (2005), ‘Sarbanes-Oxley: A Price Worth Paying?’ 19 May.Google Scholar
- Eichengreen, B. (1998), Globalizing Capital, Princeton, NJ: Princeton University Press.Google Scholar
- Fligstein, N. (2001), The Architecture of Markets, Princeton, NJ: Princeton University Press.Google Scholar
- Ford, J. (2008) ‘A Greedy Giant Out of Control’, Prospect Magazine, Issue 152.Google Scholar
- Friedman, M. (1953), Essays in Positive Economics, Chicago, IL: University of Chicago Press.Google Scholar
- Galbraith, J. K. (1975), Money: Whence It Came, Where It Went, Boston, MA: Houghton Mifflin.Google Scholar
- Galbraith, J. K. (2008), ‘The Collapse of Monetarism and the Irrelevance of the New Monetary Consensus’, Levy Economic Institute, Policy Note 1.Google Scholar
- Gapper, J. (2009) ‘Clearing Up the Future of Futures’, Financial Times, 1 October.Google Scholar
- Goodman P. (2008) ‘Taking Hard New Look at Greenspan Legacy’, New York Times, 8 October.Google Scholar
- Hayek, F. A. (1982), Law, Legislation and Liberty, London: Routledge & Kegan Paul.Google Scholar
- Hirsch, F. (1978), ‘The Ideological Underlay of Inflation’, in F. Hirsch and J. Goldthorpe (eds), The Political Economy of Inflation, London: Martin Robertson.Google Scholar
- Ingham, G. (2002), ‘Shock Therapy in the City’, New Left Review, 14: 152–8.Google Scholar
- Jacobs, B. I. (1999), Capital Ideas and Market Realities: Option Replication, Investor Behaviour, and Stock Market Crashes, Malden, MA: Blackwell.Google Scholar
- Keynes, J. M., (1936 ), The General Theory of Employment, Interest, and Money, New York: Harbinger Book.Google Scholar
- Kynaston, D. (1995), ‘The Bank of England and the Government’, in R. Roberts and D. Kynaston (eds), The Bank of England, Oxford: Oxford University Press and Clarendon.Google Scholar
- Kyrtsis, A-. A. (2010), ‘Introduction: Financial Deregulation and Technological Change’, in this volume.Google Scholar
- Lohr, S. (2009), ‘It’s Imperative to Engineer Better Risk Modelling’, Australian Financial Review, reprinted from the New York Times, 14 September.Google Scholar
- MacDonald, S. B. (2005), ‘The Rise and Fall of the Glass-Steagall Act’, Financial History Magazine, 83: 12–15.Google Scholar
- Mannheim, K. (1936), Ideology and Utopia, London: Routledge & Kegan Paul.Google Scholar
- McKinnon, R. I. (1993), The Order of Economic Liberalization, Baltimore, MD: John Hopkins University Press.Google Scholar
- Mehrling, P. (2005), Fischer Black and the Revolutionary Idea of Finance, Hoboken, NJ: John Wiley & Sons.Google Scholar
- Nason, D. (2007), ‘Central Banks Act in Bid to Arrest Slump’, The Weekend Australian, 11–12 August.Google Scholar
- Partnoy, F. (2003), Infectious Greed: How Deceit and Risk Corrupted the Financial Markets, London: Profile.Google Scholar
- Quiggin, J. (2002), ‘The Fall and Rise of the Global Economy’, Evatt Foundation: 2, http://evatt.labor.net.au/publications/books/12.html.
- Rajan, R. G. (2005), ‘Has Financial Development Made the World Riskier?’, Paper on www.kc.frb.org/PUBLICAT/SYMPOS/2005.
- Roberts, P. C. (2008), ‘A Futile Bailout as Darkness Falls on America’, Counterpunch, 8 October 2008, http://www.countercurrents.org.
- Schumpeter, J. A. (1961 ), The Theory of Economic Development, Cambridge, MA: Harvard University Press.Google Scholar
- Smithin, J. N. (1996), Macroeconomic Policy and the Future of Capitalism: The Revenge of the Rentiers and the Threat to Prosperity, Cheltenham: Edward Elgar.Google Scholar
- Stretton, H. (2000), Economics, Sydney: UNSW Press.Google Scholar
- Tett, G. and Gangahar, A. (2007), ‘Why Computer Models Proved Unequal to Market Turmoil’, Financial Times, 14 August.Google Scholar
- Van Duyn, A. (2009), ‘Hidden Costs Emerge from the Debris of Lehman Crash’, Financial Times, 13 September.Google Scholar
- Wade, M. (2006), ‘Mortgage Now Lifelong Debt’, Sydney Morning Herald, 8–9 April.Google Scholar
- Wolf, M. (2007), ‘The New Capitalism’, Financial Times, 19 June.Google Scholar