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This mindset was made possible by their intensive investments in new technologies that made transactions inherently unauditable and untraceable by the Securities and Exchange Commission and other governance entities. Given the automation of these complex trading workflows and the inability of governance bodies to keep pace with technological advances, coupled with banker's unwillingness to assist governments in tracking increasingly intricate transactions, the bankers could literally make their own rules up as they went along. What has differentiated this global economic downturn from others is how pervasive this attitude has become of offloading risk by aggregating toxic and bad loans together, using technologies to increase speed of transactions while alleviating accountability (Corden, 2009).
An aversion to risk has been replaced by a consolidating, aggregating and re-selling of completely worthless and often called "toxic" loans, with accountability of the performance of investments left by the wayside. Bankers had the most to gain by this practice as they sell the bundled set of loans, some toxic, some reasonably stable, to unsuspecting governments and corporations globally. Aversion to risk has been replaced with the marketing and collaborative support of risk by these bundled packages of bad loans and fraudulent financial instruments. With speed of transactions optimized, the world's governance organizations could simply not stay up with the sophistication and speed of these bank-to-bank and bank-to-nation transactions over time. One only needs to look to AIG and their aggressive use of credit-default swap trades, which openly violated ethics and federal laws to see how the complete lack of ethics on the part of this bank also contributed to the economic crisis (Pengelly, 2009). Not only had the bankers who orchestrated credit default swaps been cognizant of their unethical and illegal activity, their...
The design, execution and continued fine-tuning of these complex banking transactions further kept the U.S. government, specifically the Securities and Exchange Commission, blinded and in many cases, completely unaware of their impact. This same situation holds true for many other nations as well, as their governance and compliance departments and ministries did not have the necessary systems in place to catch the level of banking-based fraud going on. From the increasing sophistication of credit swaps and the deliberate lack of audit trails to the development of financial products and services deliberately meant to mislead consumers, the beginnings of the economic crisis can be tied directly to the lack of banking ethics (Bogle, 2009). Compliance legislation as a result needs to enforce laws through audits and not just through laws if the banking community globally is to become more ethical over time (Dobson, 2003).
References
John C. Bogle. (2009, April 21). A Crisis of Ethic Proportions. Wall Street Journal (Eastern Edition), p. A.19.
Corden, W. (2009). The World Credit Crisis: Understanding It, and What to Do. The World Economy, 32(3), 385.
John Dobson. (2003). Why Ethics Codes Don't Work. Financial Analysts Journal, 59(6), 29-34.
Jeffrey C. Gerrish. (2002). Ten new commandments for corporate governance. American Bankers Association. ABA Banking Journal, 94(11), 16-20.
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