Stiglitz on the Moral Crisis in the Banking Industry

Joseph Stiglitz, Nobel Prize winning economist and professor at Columbia University, discussed the moral crisis in the banking industry in his recently released book Freefall.

After Tuesday's Congressional hearings on Goldman Sachs, Stiglitz words are apt:

The investment bankers would like us to believe that they were deceived by those that sold the mortgages to them. But they were not. They encourgaged the mortgate originators to go into the risky subprime market because it was only through the ample supply of mortgages and the transformation of the risky assets into new products that they earned the fees and generated the returns that, through leverage, made them look like financial wizards. If they were deceived, it was because they didn't want to know. . . .

But far harder to forgive is the moral depravity -- the financial sector's exploitation of poor and even middle-class Americans. . . . But instead of asking why the regulators didn't stop this, we should have asked what happened to the moral compunctions of those engaging in these practices.

. . .

No matter how you look at it, our banks and our bankers, both before and during the crisis, did not live up to the moral standards that we should hope for, especially in their exploitation of ordinary borrowers. The subprime mortgages are just another example of a long litany of abusive practices in a variety of venues, which include student loans, pay day loans, rent-a-centers, and credit and debit cards.