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Abigail Hofman, in the Financial Times today, accuses the banking industry of being profit-aholics:

Investment banks are all about making money. At the extreme, this means making money for employees not shareholders. The big revenue producers are revered. It is not considered prudent to upset them by asking too many questions.

This rabid quest for mo’ money, she posits, is the source of the current mortgage mess:

The subprime meltdown is a perfect example of the “emperor has no clothes” phenomenon. These were complex products, yet obfuscation was considered acceptable. Bank chief executives should have asked more questions. I suspect they saw the juicy profits and hoped underlings understood the risks.

It’s also the source of every financial debacle of the past 25 years:

The past is littered with the fallout of banking binges. Think about the dotcom fiasco of the late 1990s or the leveraged buyout mania of the late 1980s. The sad truth is that the culture is one of lemming-like imitation. There is too much looking over the shoulder at rivals and not enough scrutiny of internal decisions. “It is not how we do,” a senior US banker told me last summer, “it is how we do relative to our peers.” This attitude caused the problem in the first place. If X bank is making millions on an innovative product, Y bank feels pressure to do the same. There is a terror of stepping off the escalator even as it approaches the edge of the cliff.

Bankers reportedly responded to Hofman’s critique by painting the backseat of her car with a technicolor yawn.

The binge culture of banking must be changed
Abigail Hofman
The Financial Times