34 μ£¥³¤ ¬μμ¬GILLIAN TETT is U.S. Chair of the Editorial
Board and American Editor-at-Large for the
Financial Times.the Japanese banking crisis, Saving the
Sun, I presumed that one o the ways to
“Ãx” Japanese Ãnance was to make it
more American.
Within Ãve years, this supposed
success had been reduced to ashes. The
brilliant innovations with strange
abbreviations, it turned out, had con-
tributed to a massive credit bubble.
When it burst, investors around the
world suered steep losses, mortgage
borrowers were tossed out o their
homes, and the value o those once
mighty U.S. banks shriveled as markets
froze and asset prices tumbled.
Instead o a beacon for the brilliance o
modern Ãnance, by 2008, the United
States seemed to be a global scourge.
Why? Numerous explanations have
been oered in the intervening years:
the U.S. Federal Reserve kept interest
rates too low, Asia’s savings glut drove
up the U.S. housing market, the banks
had captured regulators and politicians
in Washington, mortgage lenders
made foolish loans, the credit-rating
agencies willfully downplayed risks.
All these explanations are true. But
there is another, less common way o
looking at the Ãnancial crisis that also
oers insight: anthropologically. Just as
psychologists believe that it is valuable
to consider cognitive biases when
trying to understand people, anthro-
pologists study half-hidden cultural
patterns to understand what makes
humans tick. That often entails examin-
ing how people use rituals or symbols,
but it can also involve looking at the
meaning o the words they use. And
although Ãnanciers themselves do not
spend much time thinking about the
words they toss around each day, those
words can be distinctly revealing.Faith-Based
Finance
How Wall Street Became a
Cult of RiskGillian Tett
W
hat caused the global Ãnan-
cial crisis? And how can the
United States avoid a
repeat? Those questions have sparked
endless handwringing among economists,
policymakers, Ãnanciers, and voters
over the last decade. Little wonder: the
crisis not only entailed the worse
Ãnancial shock and recession in the
United States since 1929; it also shook
the country’s global reputation for
Ãnancial competence.
Before the crisis, Wall Street seemed
to epitomize the best o twenty-Ãrst-
century Ãnance. The United States had
the most vibrant capital markets in the
world. It was home to some o the most
proÃtable banks; in 2006 and early
2007, Goldman Sachs’ return on equity
topped an eye-popping 30 percent.
American Ãnanciers were unleashing
dazzling innovations that carried
newfangled names such as “collateralized
debt obligations,” or ²£s. The
Ãnanciers insisted that these innova-
tions could make Ãnance not only more
eective but safer, too. Indeed, Wall
Street seemed so preeminent that
in 2003, when I published a book aboutWHAT HAPPENED TO THE AMERICAN CENTURY?
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