精东传媒

June 27, 2022

New book reveals power and greed behind the global financial crisis

Banking specialist warns we’re destined for future financial crises if institutional practices don’t change

A new book from a 精东传媒 of 精东传媒 (UOW) banking and finance specialist explores the US investment banking industry and the institutional drivers behind the global financial crisis (GFC).

(Cambridge Scholars, 2022) by traces the pattern of crises that have impacted the US investment banking industry to reveal the longstanding banking culture that was established at the birth of the United States and culminated in the GFC.

Dr Mazzola, a lecturer in the School of Business, said the book is a pertinent reminder that the behaviour of banks has not improved since the 2008 GFC.

鈥淲ith banking culture, it seems the more things change, the more things stay the same,鈥� Dr Mazzola said.

鈥淲hile writing my book I found repeated flawed behavioural patterns prior to each crisis from the American War of Independence to the present day.鈥�

The book finds that the culture of the industry, behaviour of individuals, and regulatory bodies all played a part in the GFC. Dr Mazzola, a former investment banker, explores how the US, the stalwart defender of capitalism, has endured a litany of characters who succumbed to the corrupting influence of power.

One of the high-profile characters Dr Mazzola critically analyses is ex-Chairman and CEO of Lehman Brothers, Richard Fuld.

Dr Mazzola reveals how Fuld鈥檚 strategy tended to push the risk boundaries even further than his predecessors in the areas of leverage, product innovation and asset positions, such as an ill-informed overexposure to the property market during the formation of the housing bubble.

鈥淔uld鈥檚 objective of attempting to generate ever-increasing profits was also self-serving as a large portion of Fuld鈥檚 compensation consisted of bonuses aligned with firm performance,鈥� Dr Mazzola said.

鈥淔uld鈥檚 domineering decision-making style should act as a warning against future governance failures. He lit the wick of the GFC flame that was fuelled by decades of greed.鈥�

Dr Mazzola said Australia鈥檚 banking culture isn鈥檛 much better, despite calls for reform.

鈥淯nfortunately, I鈥檓 not optimistic that things will change dramatically. In Australia, we鈥檙e two years on from the Banking Royal Commission and there hasn鈥檛 been the progress you鈥檇 expect in the scandal-prone sector,鈥� he said.

鈥淓xploitation of customers, the misalignment of governance frameworks and practices, and the profit driven performance incentives which drive self-interest combine to maintain a culture underpinned by power and greed.鈥�

鈥淚 hope my book offers the industry a cautionary tale because until the dysfunctional human behaviours that led to the GFC are modified, we are destined to suffer similar crises.鈥�

Countdown to the Global Financial Crisis: A Story of Power and Greed will be formally launched by recently retired Financial Services Institute of Australasia (FINSIA) Chief Executive, Chris Whitehead, on Friday 1 July 2022 at the Sydney Business School.