We’ve all intuited that the latest financial crisis was caused by greed for filthy lucre. The only question is, What was the mechanism? Journalist Mark Gilbert sets out to provide the answer in Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable.

His point is that almost everyone was in on this, not least individuals who had scraped together the down-payment on a house. Banks didn’t mind taking on these high-risk mortgages: they could bundle the loans into securities and flip the risk to someone else. Not only that, but securitization brought them the capital to make even more of these dubious loans. And realtors, working on percentages, had no objection to seeing ever more sales at ever higher prices.

Bankers then packaged asset-backed securities and esoteric derivatives into collateralized debt obligations, instruments so complex that no one could realistically assess their riskiness. Most people didn’t even try. Instead they purchased risk assessments from ratings agencies, who were happy to have this extra source of revenue. Only later was it learned that the ratings agencies’ methodology had been no more sophisticated than assuming that the future would be the same as the past. And banking executives, pleased with their ever higher returns, had no interest in shining a light on the murky area of risk management, to which they paid only lip service.

Eventually, the accident-waiting-to-happen, happened. As the housing bubble passed its peak, banks in London found it impossible to assess the impairment in the value of their assets. Not knowing how much cash they needed in reserve, they stopped lending altogether. Panic set in. Customers lined up outside one British bank to get their money back. In the United States, clients pulled their money out of Lehman Brothers, which then went bankrupt. Only tax dollars, issued under the notorious “too big to fail” doctrine, kept more firms from failing.

Mark Gilbert ends his account of the crisis, which is illustrated with telling charts, with some prescriptions for reform. What his proposed systemic changes don’t do, of course, is reform human nature. The question is not if another bubble will happen, but when.


Mark Gilbert. Complicit: How Greed and Collusion Made the Credit Crisis Unstoppable. New York: Bloomberg Press, 2010. Hardcover. 190 pages. ISBN 9781576603468. $24.95.