Greenspan Shocked

Alan Greenspan is shocked and confused that bankers would fail to protect their shareholders. Why would they? Each actor was supposed to act in the best interests of the fictitious corporation for which they worked. Each actor, therefore, dons a mask of disinterestedness while pursuing his own interests. The banker wants a bonus and goes after profits, real or imaginary, and takes as many risks as he is allowed to take. The shareholders want their shares to appreciate and/or yield dividends, so they don't check the risk taking. The cautious banker would get left behind and show only modest profits compared to his more highly leveraged competitors, and the shareholders would punish him for it. The market would punish him for it. His superiors would punish him. He'd go home, and his wife would punish him, too.

There is simply nothing in the system to check the excesses that brought the credit system down except for the prospect of a massive failure, and nobody expects their bank that they run as geniuses from the best schools to fail. How could it? They're too big to fail. They've never failed at anything, so they're not going to fail now.

The thing is that a lot of these bankers aren't even very bright. They don't even know how their bank works half the time. Sure, they went to Ivy League and quality safety schools and all that, but they were legacies who didn't really need to be all that smart to get in. And once you're in, those schools are no more demanding than others. After school, positions were made for them at banks, and they patted themselves on their backs for rising so high in the meritocracy.

Who will pay for their ineptitude? The shareholders, taxpayers, working stiffs at the banks. You can bet the masters of the universe will land on their feet. Nobody will remember whose bright idea it was to walk the leverage plank all the way to the end.