Greed Vs Stupidity

In a great op-ed piece for the NY Times, David Brooks tries to explore the reasons for the current financial crisis. He draws pieces from two different articles, one blaming greed in the financial sector and another blaming stupidity on the part of the financial industry because it forgot to do its own due diligence before investing heads over heels in stuff that it had little clue about.

In comparing the two schools of thought, David Brooks writes:

Both schools agree on one thing, however. Both believe that banks are too big. Both narratives suggest we should return to the day when banks were focused institutions — when savings banks, insurance companies, brokerages and investment banks lived separate lives.

We can agree on that reform. Still, one has to choose a guiding theory. To my mind, we didn’t get into this crisis because inbred oligarchs grabbed power. We got into it because arrogant traders around the world were playing a high-stakes game they didn’t understand.