Scandal After Scandal, Lie Upon Lie ... What's Going On?

Many bankers, regulators and politicians have been caught in lie after lie and scandal after scandal.

Why haven't they been shamed by all of the disclosures about their behavior, and chastised by the destruction their actions are causing?

Why do we keep falling for the same shenanigans over and over?

We'll answer each of these questions one at a time.

Many of the People Running Wall Street and D.C. Are - LITERALLY - Psycopaths

According to psychologists and sociologists - many on Wall Street and D.C. are not like you and me. They are literally psychopaths.

Reuters reported Tuesday:

In a survey of 500 senior executives in the United States and the UK, 26 percent of respondents said they had observed or had firsthand knowledge of wrongdoing in the workplace, while 24 percent said they believed financial services professionals may need to engage in unethical or illegal conduct to be successful. Sixteen percent of respondents said they would commit insider trading if they could get away with it, according to Labaton Sucharow. And 30 percent said their compensation plans created pressure to compromise ethical standards or violate the law.

A number of commentators think the numbers are low, because of self-reporting. For example, Richard Eskow writes:

I discussed the survey with a few other people familiar with the banking industry, and they had the same reaction I did: If anything, those numbers sound low. That makes sense. Admitting your criminal inclinations to a total stranger isn't as easy as telling a them your favorite color or what kind of music you like.

As we've repeatedly noted, psychopaths caused the financial crisis … and they will do it again and again unless they are removed from power.

The March/April issues of CFA Magazine notes that the rates of psychopaths in Wall Street is much higher than the general population, and reports:

These "financial psychopaths" generally lack empathy and interest in what other people feel or think. At the same time, they display an abundance of charm, charisma, intelligence, credentials, an unparalleled capacity for lying, fabrication, and manipulation, and a drive for thrill seeking. A financial psychopath can present as a perfect well-rounded job candidate, CEO, manager, co-worker, and team member because their destructive characteristics are practically invisible. They flourish in fast-paced industries and are experts in taking advantage of company systems and processes as well as exploiting communication weaknesses and promoting interpersonal conflicts.

Bloomberg notes:

The “corporate psychopaths” at the helm of our financial institutions are to blame [for the financial crisis]. Clive R. Boddy, most recently a professor at the Nottingham Business School at Nottingham Trent University, says psychopaths are the 1 percent of “people who, perhaps due to physical factors to do with abnormal brain connectivity and chemistry” lack a “conscience, have few emotions and display an inability to have any feelings, sympathy or empathy for other people.” As a result, Boddy argues in a recent issue of the Journal of Business Ethics, such people are “extraordinarily cold, much more calculating and ruthless towards others than most people are and therefore a menace to the companies they work for and to society.” How do people with such obvious personality flaws make it to the top of seemingly successful corporations? Boddy says psychopaths take advantage of the “relative chaotic nature of the modern corporation,” including “rapid change, constant renewal” and high turnover of “key personnel.” Such circumstances allow them to ascend through a combination of “charm” and “charisma,” which makes “their behaviour invisible” and “makes them appear normal and even to be ideal leaders.” *** They “largely caused the crisis” because their “single- minded pursuit of their own self-enrichment and self- aggrandizement to the exclusion of all other considerations has led to an abandonment of the old-fashioned concept of noblesse oblige, equality, fairness, or of any real notion of corporate social responsibility.” *** He says the unnamed “they” seem “to be unaffected” by the corporate collapses they cause. These psychopaths “present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings and investments, and as lacking any regrets about what they have done. They cheerfully lie about their involvement in events, are very convincing in blaming others for what has happened and have no doubts about their own worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.”

The Independent reports:

Mr Boddy is not alone. In Jon Ronson’s widely acclaimed book The Psychopath Test, Professor Robert Hare [the world's leading expert on psychopathy] told the author: “I should have spent some time inside the Stock Exchange as well. Serial killer psychopaths ruin families. Corporate and political and religious psychopaths ruin economies. They ruin societies.” *** A senior UK investment banker and I [were] discussing the most successful banking types we know and what makes them tick. I argue that they often conform to the characteristics displayed by social psychopaths. To my surprise, my friend agrees. He then makes an astonishing confession: “At one major investment bank for which I worked, we used psychometric testing to recruit social psychopaths because their characteristics exactly suited them to senior corporate finance roles.” Here was one of the biggest investment banks in the world seeking psychopaths as recruits. *** A 2,200-page report by Anton Valukas, the Chicago-based lawyer hired by a US court to investigate Lehman’s failure … revealed systemic chicanery within the bank; he described management failures and a destructive, internal culture of reckless risk-taking worthy of any psychopath. So why wasn’t Mr Fuld spotted and stopped? I’ve concluded it’s the good old question of nature and nurture but with a new interpretation. As I see it, in its search for never-ending growth, the financial services sector has actively sought out monsters with natures like Mr Fuld and nurtured them with bonuses and praise. *** Take Sir Fred Goodwin of RBS, for example. Before he racked up a corporate loss of £24.1bn, the highest in UK history, he was idolised by the City. In recognition of his work in ruthlessly cutting costs at Clydesdale Bank he got the nickname “Fred the Shred”, and he played that for all it was worth. He was later described as “a corporate Attila”, a title of which any psychopath would be proud.

We've previously observed that researchers have found that the brains of psychopaths have a dopamine abnormality which creates a drive for rewards at any cost, and causes them to ignore risks.

As PhysOrg writes:

Abnormalities in how the [brain] processes dopamine have been found in individuals with psychopathic traits and may be linked to violent, criminal behavior. *** The brains of psychopaths appear to be wired to keep seeking a reward at any cost, new research from Vanderbilt University finds. The research uncovers the role of the brain’s reward system in psychopathy and opens a new area of study for understanding what drives these individuals. *** The results were published March 14, 2010, in Nature Neuroscience. “Psychopaths are often thought of as cold-blooded criminals who take what they want without thinking about consequences,” Joshua Buckholtz, a graduate student in the Department of Psychology and lead author of the new study, said. “We found that a hyper-reactive dopamine reward system may be the foundation for some of the most problematic behaviors associated with psychopathy, such as violent crime, recidivism and substance abuse.” *** To examine the relationship between dopamine and psychopathy, the researchers used positron emission tomography, or PET, imaging of the brain to measure dopamine release, in concert with a functional magnetic imaging, or fMRI, probe of the brain’s reward system. *** The researchers found in those individuals with elevated psychopathic traits the dopamine reward area of the brain ... was much more active while they were anticipating the monetary reward than in the other volunteers.

Experts also tell us that many politicians also share traits with serial killers. Specifically, the Los Angeles Times noted in 2009:

Using his law enforcement experience and data drawn from the FBI’s behavioral analysis unit, Jim Kouri has collected a series of personality traits common to a couple of professions. Kouri, who’s a vice president of the National Assn. of Chiefs of Police, has assembled traits such as superficial charm, an exaggerated sense of self-worth, glibness, lying, lack of remorse and manipulation of others. These traits, Kouri points out in his analysis, are common to psychopathic serial killers. But — and here’s the part that may spark some controversy and defensive discussion — these traits are also common to American politicians. (Maybe you already suspected.) Yup. Violent homicide aside, our elected officials often show many of the exact same character traits as criminal nut-jobs, who run from police but not for office. Kouri notes that these criminals are psychologically capable of committing their dirty deeds free of any concern for social, moral or legal consequences and with absolutely no remorse. “This allows them to do what they want, whenever they want,” he wrote. “Ironically, these same traits exist in men and women who are drawn to high-profile and powerful positions in society including political officeholders.” *** ”While many political leaders will deny the assessment regarding their similarities with serial killers and other career criminals, it is part of a psychopathic profile that may be used in assessing the behaviors of many officials and lawmakers at all levels of government.”

We will therefore remain disempowered if we assume that the super-elites are “like us”.

(Indeed, contrary to common American stereotypes - and while wealth does not necessarily indicate whether someone is a good or a bad person - studies show that the super-wealthy tend to be less empathic and more likely to cheat than those with more modest wealth.)

Unless we learn to spot “wolves in sheep’s clothing”, we will continue to fall prey to their scams.

Unless We Remove the Psychopaths from Power, They Will Cause More and More Destruction

The inmates are still running the asylum.

Anyone who knows Jamie Dimon, Lloyd Blankfein or the other Wall Street “leaders” can tell you that they haven’t changed a bit since 2008. They are not repentent for their role in the financial crisis. They don’t feel bad that the taxpayers have had to bail them out again and again … and that they have used that money to enrich themselves and stick it to the little guy.

As the Independent notes:

Mr Ronson reports: “Justice departments and parole boards all over the world have accepted Hare’s contention that psychopaths are quite simply incurable and everyone should concentrate their energies instead on learning how to root them out.” But, far from being rooted out, they are still in place and often in positions of even greater power. As Mr Boddy warns: “The very same corporate psychopaths, who probably caused the crisis by their self-seeking greed and avarice, are now advising governments on how to get out of the crisis. Further, if the corporate psychopaths theory of the global financial crisis is correct, then we are now far from the end of the crisis. Indeed, it is only the end of the beginning.”

I’ve been saying the same thing since 2008:

Ralph Waldo Emerson said: “Who you are speaks so loudly I can’t hear what you’re saying.” Its like a thief who has been arrested 5 times for burglary. Even though he says all the right things to the judge at sentencing, the judge is still going to throw the book at him. If the thief is appointed to head a government commission on corruption, do you think people will have confidence in the commission or its proposed actions? *** [Those in power] may be saying nice things about fixing the economy, shoring up the financial system and helping American citizens, but people don’t believe them anymore. They’ve been proven liars one too many times. *** The only thing that can restore confidence in the economy and the financial system is to replace the whole lot of them (tar and feather them) with honest leaders who will do what’s best for the people. Forget the “toxic debt” that the talking heads keep referring to. The only way to restore confidence is to get rid of the “toxic leaders” who caused the mess.

I noted in October: