The financial crisis remains somewhat opaque as books are written, investigations launched, hearings called, and bills paid. How was so much money lost? How can those responsible for the crisis and ransomed by the government keep raking in money, and keep paying themselves bonuses for doing so?
I think it is useful to just call it fraud. The financial industry has become addicted to it. There is no boring way to make tens of billions of dollars in the financial industry- not if one cares about one's "clients". But there are many ways to make that kind of money through fraud (video).
Take, for instance, sub-prime loans. These are the antithesis of boring banking. Standards one would apply when lending one's own money were thrown out the window. Hopeless loans were reaped from ignorant (or, one might say "faith-based") homebuyers, then passed on like hot potatoes through packagers like Goldman Sachs, and on to investors who were kept ignorant of their true temperature by the collusion of agencies who shared in packaging them with crisp, cool triple-A ratings.
Or take the world of derivatives. In a humbler world, a farmer wants some assurance for his corn crop in advance, so enters contracts to sell it at a set price, long before it is harvested. Who takes the other end of that deal? A speculator who has money to invest and judges the weather, the market, and other factors, including the gullibililty and reliability of the farmer. This is certainly a casino of sorts, but if the derivatives are constructed in a uniform way, prices set publicly in a large market, and public interest rules made and enforced by the state, (i.e. the commodity futures markets), this can yet become a reasonably fair transaction.
But if the same derivatives are sold privately, with no public notice of values and terms, let alone an open and competing market or government regulation, the opportunities for fraud are obvious. Why would any suckers let themselves in for such treatment? That remains a serious question, and a legal one as suits begin to be filed. Often it was one bank trying to take other bankers to the cleaners, leading eventually to seizure of the entire system when one bank said "no more", and the music stopped. Or an insurance company like AIG trying to make some easy money defrauding its customers (and now the taxpayers) by printing pieces of paper in the form of insurance policies on esoteric gambles (CDSs) without any money to back them up, based on fraudulent risk "models".
Often the short term payouts to those doing the deals on both ends were generous, as each in essence were playing their own institutions for suckers. In short, many kinds of fraud were at work in the recent meltdown, some based on blind optimism and ignorance, but more based on cynical arbitrage of short-term greed over fulfillment of basic fiduciary, institutional, and ethical duties.
(Incidentally, a somewhat similar arbitrage happens every day in our short-term energy thinking, defrauding future generations of a healthy planet. But that's another story.)
Which brings me to the other major fraudulent institution of our day- religion. Not just your garden variety televangelist huckster or Reverend Dollar. No, the whole kit and kaboodle, from Bible church of Jesus to the Pope in Rome. Each sells over-pumped products to their clients based on false pretenses, all winding up ultimately in the bankruptcy proceedings of the grave.
Right now the focus is on the Catholic church in its frantic coverup and spin over the fraudulent treatment of minors. No need to go into details. But this is not just a case of a few bad apples in the barrel. No, the abusive priests are bad apples, but the culture of the church, indeed the very premise of the barrel itself, is fraudulent from top to bottom.
Orwellianisms flow without end from the mouths of preachers- life everlasting, god incarnated as man, crucifixion as triumph, prayer as efficacious, god as omnigood and omnipotent. As art, their performances are without parallel, conjuring an alternate universe of meaning, justice, and joy. Confined to art, the harm would be minimal. But true to its shamanistic origins, it is a participatory art, playing on the fears and hopes of its subjects, as all cons do, to rope them into the religion meme- to give money, to give time and energy, to spread the meme to others, going door-to-door, if necessary.
(At this point let me put in a good word for one of Herman Melville's greatest works- The Confidence-Man. He portrays in surreal fashion a riverboat going down the Mississippi with a streaming cast of characters, each preying on the other, but with a mysterious protean confidence man at the center who illuminates the hopes and fears of each party in turn, using Kafka-esque indirection and frankness.)
Do religions provide hope to the hopeless? Goldman Sachs also provides hope to its clients, in the form of tangible investments to keep them afloat in retirement, or gain money for other purposes. And sometimes, that hope is even fulfilled, unlike the 100% loss sustained by religious believers, year in and year out.
Do people perform good works under the influence of religion? They do, and that is commendable. Such work makes everyone happier and strengthens communities. Banks likewise make philanthropic gestures for their communities and other good causes. They are also to be commended. Are their motives less pure than those of religion? Both are image-building affairs, translating the goodwill of their members (whether earnest or cynical) into public proselytism, hoping to trade on this good image for more business in the future and stronger buy-in among existing members.
Do religions foster community and happiness all around? Ponzi schemes foster community as well, though these tend to burn out quickly. The Madoff scheme was exceptionally long-lived, nurturing the hopes of a large community of his communicants for over a decade. Religious Ponzi schemes, in comparison, can be perpetual, since they concern an undiscover'd country from whose bourne no traveller returns to expose their fraudulent nature.
More seriously, communities fostered by financial institutions are not inculcated with the belief that those sponsored by other such institutions are fundamentally evil, require proselytization, and are going to the devil if they fail to convert to the true doctrine. The high degree of (false) meaning conjured by religion generates commensurately high commitment, leading naturally to extremism in those it fully captures.
Which is the higher and which the lower form of fraud is a matter of debate. The culturally conjured symbols of Mammon, or the fervent and ever-unfulfilled hopes preyed upon by the officers of religion? The dollar, as token of the hard work of others, studiously waylaid in the canyons of Wall Street, or the phantasm of life everlasting peddled in every church in the land? Now that secularity has largely brought the temporal power of the church to heel after several centuries of hard work, one has to say that Mammon has the greater power, and poses the greater danger. Yet the fraud of religion is usually more thorough.
- Hitchens on the Pope as criminal racketeer. Who ever suspected?
- Even that nice Michael Ruse has second thoughts about Catholicism.
- The FDIC fights back.
- And even Martin Wolf is looking for radical reform.
- UBS? Fraud ongoing, thank you very much.
- Next up for the church: women.
