FOOL'S GOLD – HOW UNRESTRAINED GREED CORRUPTED A DREAM, SHATTERED GLOBAL MARKETS AND UNLEASHED A CATASTROPHE by GILLIAN TETT
| Author | JOHN FLOOD |
| Published date | 01 December 2009 |
| Date | 01 December 2009 |
| DOI | http://doi.org/10.1111/j.1467-6478.2009.00484.x |
Book Reviews
FOOL'S GOLD ± HOW UNRESTRAINED GREED CORRUPTED A
DREAM, SHATTERED GLOBAL MARKETS AND UNLEASHED A
CATASTROPHE by GILLIAN TETT
(London: Little, Brown, 2009, xiv + 338 pp., £18.99)
It all seemed so simple. If risk were dispersed around the globe, throughout
the financial system, boom and bust would be a phantom of the past. The
finest minds from finance, statistics, and law applied themselves to con-
verting the ideal into reality. This `new dawn' of finance would embrace new
technologies that would shrink financial risk into sufficiently small slices
that no single bit could be responsible for a major eruption in the system.
Alan Greenspan and Gordon Brown were in the vanguard of promoting the
market's freedom to innovat e with the lightest touch of regul ation.
`Groupthink' opined that once counterparty risk was fully dispersed, the
financial system would never be rocked by crises like the Great Depression.
Of course, it didn't work and we are in one of the worst financial crises ever.
How deep and long it will be is, pace Rumsfeld, an unknown unknown.
I recall I was to give a paper at the Berlin Law and Society Association
meeting in 2007 on how new secondary debt markets were removing the
threats of large-scale bankruptcies. I aborted the presentation: by the time of
the conference the financial system was imploding and my paper was
redundant. In the two years since the credit crisis has rolled through our
lives, I have been surprised by the lack of response by socio-legal scholars in
analysing this phenomenon. Elsewhere, for example, one of the recent issues
of Accounting Organizations and Society contained a series of articles on
accounting research and the crisis. No socio-legal journal has (yet?) pub-
lished anything akin to this. I suspect the reasons are located in the difficulty
of understanding the causes of the crisis and what, if any, lawyers' roles in it
were. Nevertheless, a small number of social scientists have been delving
into these dark complex areas. Donald MacKenzie and Karin Knorr Cetina
are two that come to mind. But to get the big picture we have to leave the
academy and migrate to the Financial Times.
In 2005 the FT gave a social anthropologist, Gillian Tett, the post of capital
markets editor. This was generally situated at the back of the newspaper.
Capital markets were arcane and seemed to exist in a shadowy world. One of
her first tasks was to attend a banking conference in Nice with the topic of
credit derivatives. Tett was completely baffled as she saw that finance `was
presented as an abstract mathematical game that took place in cyberspace'
replete with concepts such as `Gaussian copula', `delta hedging', and `first-
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