Masters of Finance

by Derek Morrison

CurrencyLogoMasters of Finance
Of derivatives fame
That built the ghost funds
That built the debt bombs
You who owned banks
Who played the money ball
We just want you to know
We now see through it all.

You fiscal thought leaders
Much wealth did you claim
You treat our world like —
Digital bits in a game
You promise a home in our hands
But then you run from our cries
As the debt mountain rises
And the value then dies.

Your ‘quant’ alchemists
Many coded spells did create
For spreading poisoned apples
Among assets of higher rate
You gamblers on short-term profit
With true value lower scored
Inflated explosive bubbles
So debt-driven prices soared.

You Gods of Sub-Prime
Who feign to receive
Markets only grow
You would have us believe
But we now see through your lies
It was all for vain
All we thought we had
Has run down the drain.

You set up the debt levers
So that others would hire
And you sat back and watched
As dreams burned in the fire
You retired to your castle
As each nation’s wealth
Burst forth from the bubble
Built so much in stealth.

In your quest for obscene profits
The risks have unfurled
Now we fear to invest
What we have left in this world
By threatening our people
And causing such pains
We don’t what it is that
Flows through your veins.

But what do we know
To speak so out of turn
You might say we’re bitter
You might say we’ll burn
But one thing we know
Because we’re not one of you
Even Mammon decided
To disown what you do.

So it’s now time for some questions
Was that bonus worthwhile?
Did we share in your windfall?
Or is that not your style?
And what of your Hedge Fund?
Did that meet your need?
Did your selling short gamble?
Get you back on your steed?

And did your claim for expenses
Also treat us like fools?
Did clearing the moat around your castle
Meet with the rules?
Was your status really so special?
As you became embroiled in the mess
Did your pathetic excuses
Play well with the press?

You false Masters of Finance
You false Gods of  Sub-Prime
You purveyors of toxic assets
Have now had your time
And when the grim reaper calls
And you’re served with his writ
Explain your part to Beelzebub
May you roast slowly on his spit.

[To listen to this verse select below]

Masters of Finance is dedicated to the victims everywhere of those human enterprises, institutions and systems which contributed to the 2007-2008 financial crash. A catastrophe that is still playing out in 2015 and which was caused, in large part, by hubristic, self-serving, or incompetent leaderships, most of whom managed to escape the pain they inflicted on others.

The genesis of Masters of Finance goes back to 2009 when I was listening to a BBC folk music programme on the internet (Travelling Folk, BBC Radio Scotland). The particular episode I was listening to featured the Centre for Political Song based at Glasgow Caledonian University in the UK and which hosts this and other research collections.

One of the songs in that particular edition of Travelling Folk was Bob Dylan’s 1963 Masters of War; a superb polemic for the time. I liked the vibrant rawness of the then angry young man highlighting what he perceived to be cynicism, incompetence, and exploitation. I wondered, however, what would happen if such a Dylanesk cadence was applied to another context, i.e. that of the near (hopefully) collapse of the global financial system in 2008.

To help orientate non-UK audiences the penultimate verse was written with the 2009 scandal relating to the claim for allowances/expenses by UK Parliamentarians in mind. Believe it or not, one claim was actually for a claim for clearing a moat“; another was for a floating duck island.

So what’s the cyber aspect to all of this?

The second and third verses of my effort hints at the ‘gaming’ aspects of modern financial systems. ‘Gaming’ as in the values and attitudes of the key players who are “treating our world like digital bits in a game” and ‘gaming’ as regards the increasing automation of the process. My thinking there was about the “quants”, i.e the economic analysts and mathematical modelers who believe they can quantify financial risks. Viewed from that perspective the world’s economies, human economic behaviours, and markets are a machine that can be studied, abstracted and, therefore, in at least part, automated. Here lay the genesis of automated financial processes that could create and process the financial products called ‘derivatives’ that were so complex that even the “masters of finance” no longer understood them, e.g.Was Software Responsible for the Financial Crisis? (Guardian, 16 October 2008).

Attaching blame to an abstract computer-based system is just so tempting to those wishing to deflect blame from themselves or other human agencies, i.e “it was the computers’ fault”. Despite my third verse, automated packaging and processing of complex derivatives was, however, not the fundamental cause of the 2007-2008 Financial Crisis.

We conclude this financial crisis was avoidable. The crisis was the result of human action and inaction, not of Mother Nature or computer models gone haywire. The captains of finance and the public stewards of our financial system ignored warnings and failed to question, understand, and manage evolving risks within a system essential to the well-being of the American public.
Source: Financial Crisis Inquiry Report, Final Report of the National Commission on the Causes of the Financial and Economic Crisis in the United States, Official US Government Edition

But “computer models going haywire” is not science fiction. Coded software algorithms can and have amplified market volatilities via automated ‘high frequency’ trading (HFT) systems where buying and selling of vast number of quoted stocks could take place in microseconds with automated information feeds affecting the behaviour of the automated system decisions. One of the best known examples of this “flash crash” potential was what happened to United Airlines stock in 2008 when an obsolete news feed item was processed as though it was fresh (Reuters, 10 September 2008). The underlying problem here is that automated financial transactions driven by algorithms based on the marginal short-term profits that can realised from HFT are reflections of bankers having become gamblers on profit – not an essential component of enabling and promoting underlying long term value and so wealth generating infrastructure.

In conclusion, Dylan’s Masters of War is still worth a listen, either in the original or covered form. My personal favourite is a cover version on YouTube by one Nathan Lee who combines powerful imagery with Dylan’s equally powerful lyrics.

Further reading, viewing, listening

Quants: The Alchemists of Wall Street (VPro International, 2010, YouTube video)

Million Dollar Microsecond, RadioLab Podcast, Season 11, Episode 4, 2013

The 2010 Flash Crash (Wikipedia)

Automated Trading Bites Some UAL Investors, Reuters, 10 September 2008

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