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The Christian Faith and the Financial Crisis
Part Two: The Financial Crisis (9)


But given the success of the revolution that began in 1979 how does Griffiths account for its apparent failure in the financial crisis of 2007-8?

He sees it not in any intrinsic flaw in the logic of the system but in the morality of the practitioners. His analysis of the financial crisis was almost entirely a matter of bad business practice. Northern Rock published dishonest accounts concealing its debts; banks failed to value their assets according to the correct market criteria; American banks encouraged people to take out mortgages they couldn't afford (the famous 'subprime mortgages'); politicians encouraged this largely through the government sponsored agencies, 'Fannie May' (Federal National Mortgage Association) and 'Freddie Mac' (Federal Home Loan Mortgage Corporation), set up to provide affordable housing to poor people; the politicians pushed for cheap credit; dubious financial products were made attractive with excessively high interest rates; there was the LIBOR scandal. He quotes the Deputy Governor of the Bank of England describing the culture of banking as a 'cesspit'. He referred favourably to the play The Power of Yes by the leftwing playwright David Haire in 2010, which analysed the whole problem in terms of 'greed'.

What was a little odd about all this was that Griffiths was for over fifteen years, covering the period up to the crash, Vice Chairman of Goldman Sachs International, and the people who interpret the problem in moral terms very often point the finger, justly or not as the case may be, at Goldman Sachs as one of the chief culprits. Matt Taibbi's article in Rolling Stone which accuses Goldman Sachs of engineering both the '.com bubble in the 1990s and the housing bubble of the early 2000s has been very widely read. (9) I don't feel I know enough to be able to comment but Goldman Sachs was certainly heavily involved in selling the 'collateralised debt obligations' and 'collateralised mortgage obligations' that were based on the mortgages that had been sold to people who couldn't afford them. One article defending Goldman Sachs against the charge of deceiving investors says: 'the problem is that they represented a bet on housing and that bet went horribly awry. What about that is so complex and hard to understand?' (10) and another: 'in fact, everyone was aware that CDO's were repackaging crap mortgages--that was the point. ... Everyone knew a lot of the mortgages might go bad, either by defaulting or prepaying. ... But if you pool the risk, only some of the bonds will go bad, while others pay off.  The result is a less risky, less volatile investment than any individual junk mortgage bond.  And it would have worked, too, if it hadn't been for a collapse in the housing market of a scale not seen since the Great Depression.' (11) Though its difficult to see how anyone could miss the possibility that the widespread selling of 'junk' mortgages in order to maintain a housing bubble would run the risk that the housing bubble would burst.

(9) Matt Taibbi: 'The Great American Bubble Machine', Rolling Stone, 9th July 2009, reprinted 5th April 2010. Available at

(10) Joe Weisenthal: 'Matt Taibbi's Goldman Sachs Story Is A Joke', Business Insider 13th July, 2009, available at

(11) Megan McArdle: 'Matt Taibbi Gets His Sarah Palin On' The Atlantic Monthly, 10th July, 2009. Available at

I do not know the structure of Goldman Sachs sufficiently to be sure but I rather imagine that the specific part for which Griffiths had most responsibility - Goldman Sachs International - would have been involved in the accounting manipulations that enabled Greece to conceal the true size of its budget deficit when it joined the eurozone, another case of a very widely read story accusing Goldman Sachs of immoral behaviour. (12)

(12) See eg: Beat Balzli: 'Greek Debt Crisis: How Goldman Sachs Helped Greece to Mask its True Debt', Der Spiegel, 8th February, 2010, Available at