Tuesday, March 23, 2010

More on Male Bashing and the Financial Crisis

It's not so much a question of allowing a financial crisis to go to waste, but of creating a narrative that will cast aspersions on those you want to blame. After all, that was the goal of yesterday's New York Magazine article on the supposedly biochemical causes of the financial crisis. My post here.

As I read it I imagined this article, with its mixture of scientific data and ideology, becoming conventional wisdom, to the detriment of men, women, and our culture at large.

It is hardly surprising that feminists and their acolytes have used the financial crisis to sustain their prejudices. As I wrote yesterday, the facts tell a very different story. They suggest that male bashing was the problem, not the solution.

Sheelah Kolhatkar argued in New York Magazine that the fault for the crisis lay in the twentysomething male traders who went off on a testosterone-fueled jag that nearly destroyed the financial system. Her solution: more female presence, thus an injection of temperance and a moderation of reckless risk-taking.

The point deserves a serious reality check, even more than I gave it yesterday. Thus, I continue the discussion.

I note that Kolhatkar gives short shrift to the Wall Street executives who gave these young traders the authority to leverage their trades at 30 or 40-1. No bank will allow a trader to take on that much leverage without adult supervision.

Dare we say that these fiftysomething executives were not suffering any excessive surges of testosterone? But if they bear the lion's share of responsibility, what is left of Kolhatkar's premise?

I would add that most of these executives, aside from being male, were also liberal Democrats. The people running Citigroup, Lehman Bros., and Goldman Sachs were all liberal Democrats. As were the other groups that bear much of the responsibility for making this risk-taking possible, even inevitable: executives at Fannie Mae and Freddie Mac.

Is it not relevant that the leadership of Fannie Mae and the Board of Directors at Citigroup were populated by alumni of the Clinton administration?

I would add, as several of the commenters on Dr. Helen's site mentioned, that Congressional Democrats stifled the Bush administration when it tried to reform Fannie Mae. Barney Frank and Maxine Waters were happy to defend Fannie's reckless lending practices. But once the crisis erupted they were out front blaming Republicans. (My thanks to Dr. Helen for linking my post!)

While the spinners and storytellers are blaming the financial crisis on the Bush administration, free market principles, and twentysomething male traders, much of the real responsibility lies elsewhere.

To continue our reality check. if it is true that too much testosterone makes for bad trading, why isn't there a black market in estrogen supplements on Wall Street? Wouldn't that be a quicker and easier solution to the problem?

The estimable Bess Levin, of Dealbreaker fame, suggested as much in her comments on the New York Magazine article yesterday. Link here.

Better yet, as I read down the comments after her article, I discovered the wise words of someone who identifies himself as Jimmy.

As reality checks go, this one merits serious attention. Simply put, Jimmy points out that virtually none of the best mutual funds or high performing hedge funds are run by women. Not exactly what Kolhatkar would have led you to believe. And he adds that one well-known woman trader, Karen Finerman, who is on CNBC's "Fast Money" show has underperformed the S&P for the last three years.

The final reality check comes to us, via Instapundit, from Randall Parker of the FuturePundit blog. Link here.

I found it serendipitous that Instapundit linked this post right after I posted mine. It has the great virtue of providing scientific evidence to buttress one of my suspicions.

Yesterday I was wondering whether the testosterone fueled frenzy of recent years differed materially from the 1980s era frenzy described so well by Michael Lewis in Liar's Poker?

There I suggested, off the top of my head, that the only real difference between then and now is that there are now more women in the financial world than there were in the 1980s.

I thought it a worthy observation, but it did not answer the question of what influence the presence of more attractive young women would have on these twentysomething traders.

As Parker reports, scientists have researched this question, and have discovered that men are prone to engage in more risky behavior when they are in the presence of attractive women. Not only that, but the presence of such women causes their testosterone levels to rise.

Remember that Kolhatkar's thesis was that bringing more women onto the trading floor would have a tempering effect on the male tendency for excessive risk-taking.

Now we have further evidence that this is untrue, but that an increase in the number of women will cause a testosterone surge and cause male traders to throw all temperance to the winds.

All we need to know now is how this applies to fiftysomething and sixtysomething male executives?

1 comment:

Memphis Steve said...

When dealing with feminist journalists all the logic and reason in the world won't make a dent in their dogma. Their 'gender lenses' make them blind to all but that which they wish to see. Nevertheless, for the rest of us it's good to hear a well reasoned and intelligent discussion of what went wrong and how intelligent investors can try to steer clear of it as much as possible in the future.