What Caused The Global Financial Crisis according to Clive Boddy

The Global Financial Crisis according to Clive Boddy

Clive Boddy is the author of Corporate Psychopaths: Organizational Destroyers, and published The Corporate Psychopaths Theory of the Global Financial Crisis in the Journal of Business Ethics. Boddy was most recently a professor at the Nottingham Business School at Nottingham Trent University and was previously a director of a marketing services company.

2. Which narrative presented by Douglas Elliott and Martin Baily of the Brookings Institute in Telling the Narrative of the Financial Crisis: Not Just a Housing Bubble best represents the causes of the Financial Crisis?

I think it was primarily Wall Street's fault as long as this includes the City of London (i.e. the UK Financial and Banking Industries) as this was large in its own right and also had many fingers (e.g. subsidiaries) in Wall Street as well. However, large proportions of the general population, being easily led, also went along with the resultant bubble, for the ride.

3. I believe the crisis is ongoing and I project the Global Financial Crisis will end in the year
2013 or beyond. I think this will go on well beyond 2013.

4. What were the primary causes of the Global Financial Crisis?
Greed, unrestrained by conscience, and fueled by a totally ruthless, selfish and ambitious love of money, power and prestige, was the main cause of the crisis. This was enabled by the global trade in and use of financial derivatives which served no real economic or social purpose and which were seemingly designed for the sole purpose of inter-bank trade to generate paper revenue and therefore paper profits and therefore monetary bonuses. The financial products, such as Collateralized Debt Obligations of Asset Backed Securities ("CDOs of ABS"), were reportedly so complex that most traders did not understand them. This begs the question - what sort of person trades in multi-million dollar products that she or he does not understand? The answer must be at best a person who was just in it for the money and at worst a person totally without conscience, such as psychopaths are. These people without a conscience are about 1% of the total population and and have come to be called Corporate Psychopaths to differentiate them from their criminal peers. The realization that because of the numbers of people involved, Corporate Psychopaths must have been working in the financial services sector and the corporate banks in which the crisis was fostered was one of the considerations that led to the development of the Corporate Psychopaths Theory of the Global Financial Crisis. This is the theory that Corporate Psychopaths, through their example, leadership and influence on their peers in the financial services sectors, led, encouraged, facilitated, enabled and therefore, ultimately caused the crisis.

5. What still should change as a result of the crisis?
Changes in financial laws, rules and regulations will have no effect if Corporate Psychopaths are still in positions of power and influence in corporate banks, as they will always find ways around the rules or ways to bend them to their own advantage. Anyone at senior director level in the corporate sector should be screened for psychopathy by a combination of other report psychopathy measures (where others report on your behavior) self-report psychopathy measures (where you report on your own behavior) and if necessary, brain scans. Their removal to positions of less influence and power will allow those with a conscience to take charge and this will decrease the greed involved and increase the humanitarian element. Governments also need to realize that in many cases the amount of money they have given banks to bail them out could have instead been given directly to individuals with mortgages to pay off their debts to the banks, thus solving the debt problem from the bottom up rather than trying to solve it from the top down. This would have re-capitalized the banks and therefore saved them, saved many people from homelessness, boosted consumer confidence, underpinned the housing market, and put money into the system where it would do most good (via the multiplier effect). This opportunity has not yet been lost as the massive "quantitative easing" is still taking place and that money could be best directed at those who need it most - those at the bottom of society rather than those at the top.

Compiled by Gary Karz, CFA
Host of InvestorHome

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