Sabotage: The Hidden Nature of Finance

The finance industry profits not by making productive investments but through fraud and other crimes, according to this provocative yet haphazard exposé. Nesvetailova and Palan, economists at City, University of London, rehash a litany of misdeeds by financial institutions: Goldman Sachs sold clients investment deals it knew would lose money; Wells Fargo created accounts for clients without their knowledge and charged them extra fees; HSBC helped Mexican drug cartels launder money; mortgage lenders signed up unqualified borrowers and sold the bad mortgages to unsuspecting investors; and banks and insurance companies concocted murky financial instruments like credit default swaps and collateralized debt obligations to bamboozle investors, and used a variety of methods, including Cayman Islands shelters and bitcoin, to evade regulations and taxes. Nesvetailova and Palan argue that these scams and dodges aren’t the work of a handful of bad actors or the effects of deregulation, but a form of “sabotage” of competitive financial markets that companies must undertake to earn profits. Their evidence for this theory is anecdotal, however. Meanwhile, their explications of byzantine banker cons are sometimes unclear, and their case for a return to New Deal–style financial regulation is short on specifics. Though the authors don’t produce the most substantive critique of the financial sector, their ideas about the industry’s intrinsic tendencies towards malfeasance will stimulate progressive readers with a strong interest in the subject.[em] (Jan.) [/em]