Silos and silences. Why so few people spotted the problems in complex credit and what that implies for the future

G. Tett

Financial Stability Review, 2010, issue 14, 121-129

Abstract: Why did so few people inside or outside the banking world spot the risks that were developing in the world of complex credit and credit derivatives before 2007? What does that failure imply for regulators and policy makers in the future? These questions have provoked a welter of debate since the banking crisis erupted – and a host of different answers. Some observers have blamed the issue on fl awed regulatory and economic thinking among policy makers and central bankers, or a “cover-up”, in the sense that bankers were deliberately hiding their riskiest behaviour from regulators. The issue of “regulatory capture” has also been blamed. However, this paper argues that two other problems need to be recognised too. Firstly, the fi nancial world was a pattern of «social silence», to coin a phrase used by Pierre Bourdieu, the French sociologist, which ensured that the operations of complex credit were deemed too dull, irrelevant or technical to attract interest from outsiders, such as journalists or politicians. Secondly, there was a problem of silos, or fragmentation,both in a structural and cognitive sense, which made it hard for both insiders and outsiders alike to take a holistic vision of how credit was developing. Taken together, that made it hard to “join up the dots” about the dangers in the credit world, until it was too late. And, as such, this raises policy questions and challenges for the future.

Date: 2010
References: Add references at CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... eview-14_2010-07.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:bfr:fisrev:2010:14:14

Access Statistics for this article

More articles in Financial Stability Review from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart (michael.brassart@banque-france.fr).