I don't like the word 'sabotage',"--a former Goldman Sachs trader admitted. "It's just harsh.... Though, frankly, how else do you make money in this business...I mean, real money."
The fundamental motive for financial innovation is not to make the system work better, but to avoid regulation and oversight. This is not a bug of the financial system, but a built-in feature. The president of the US is not a tax avoider because he is an especially fraudulent financier; he's a tax avoider because he is a wealthy man in a system premised on such deceit. Finance is an industry of sabotage.
This book is a brilliant, intellectual detective story that traces the origins of financial sabotage, starting with the work of a prescient American economist who saw the capacity for banks and businesses to dissemble and profit as early as the 1920s. What was accomplished modestly in the first half of the 20th century became a booming global industry in the 1980s. Financialization took over everything, culminating in instruments so complex and confusing their own creators were being destroyed by them in 2008.
With each financial bust, people expect to hear who the culprit was, and cynically know to not expect much punishment to ever reach them. But the innovation of this book is to show that each individual gaming the system isn't a crook---the whole system is sabotage.
The finance industry profits not by making productive investments but through fraud and other crimes, according to this provocative yet haphazard expos . Nesvetailova and Palan, economists at City, University of London, rehash a litany of misdeeds by financial institutions: Goldman Sachs sold clients investment deals it knew would lose money; Wells Fargo created accounts for clients without their knowledge and charged them extra fees; HSBC helped Mexican drug cartels launder money; mortgage lenders signed up unqualified borrowers and sold the bad mortgages to unsuspecting investors; and banks and insurance companies concocted murky financial instruments like credit default swaps and collateralized debt obligations to bamboozle investors, and used a variety of methods, including Cayman Islands shelters and bitcoin, to evade regulations and taxes. Nesvetailova and Palan argue that these scams and dodges aren't the work of a handful of bad actors or the effects of deregulation, but a form of "sabotage" of competitive financial markets that companies must undertake to earn profits. Their evidence for this theory is anecdotal, however. Meanwhile, their explications of byzantine banker cons are sometimes unclear, and their case for a return to New Deal style financial regulation is short on specifics. Though the authors don't produce the most substantive critique of the financial sector, their ideas about the industry's intrinsic tendencies towards malfeasance will stimulate progressive readers with a strong interest in the subject.