Fear, Greed, and the Financial Crisis—an American Expat's View From Abroad

Before I moved to Slovenia in 1993, I was a banker in New York for five years. I worked at the French government-owned Banque Nationale de Paris as an analyst and lender to the major Wall Street firms. At the time of my departure, my client list included Bear Stearns, Merrill Lynch, and Lehman Brothers, none of which, after the past few weeks, exist in their previous form.

I didn't love my job—if I had, it probably would have been more difficult for me to follow a Slovenian poet to a tiny former-communist country sitting on the rim of a terrible war—but I didn't hate it, either. I was not a natural financier, someone who takes in complicated columns of numbers at a glance. Nor was I a natural gambler or risk-taker. It was an intellectual challenge for me to understand the innovative financial instruments pioneered by the firms I lent to and calculate the underlying risks they posed to my employer. And the risks were considerable: During the years I worked in New York finance, from 1987 to 1993, Wall Street experienced one of its periodic crises. On Oct. 19, 1987, the New York stock exchange suffered the largest one-day decline in its history. Drexel Burnham Lambert went bankrupt in 1990. Donald Trump's empire toppled in 1991, Robert Maxwell's in 1992, and there have been countless crises, defaults, and speculative rushes in the markets since then. It seems like the nature of the beast, and in the past, the beast has always managed to come roaring back.

So what makes the current situation worse? Won't the global financial systems be able to absorb these last shocks as they've absorbed all the previous ones? The current bubble/collapse is composed of the standard ingredients: overvalued assets, credit crunch, panic in the markets. Won't governments and central banks be able to stanch the flow and restore confidence? Won't the markets return to equilibrium, the economy bounce back as it always has before?

Maybe.

Though this time something feels different, more like a millennial change, like the end of an era, or like the end of history, as Francis Fukuyama put it after communism fell. It feels as if there is no equilibrium to which to return. Recently, reflecting on events taking place on Wall Street, a reporter for CNN made an unusually bald statement. "Markets are run by two things," he said, "fear and greed." During the good old days of the Cold War, a similarly dichotomous observation might have been made about the two types of government that prevailed on the planet: that the communist system was run on fear and the capitalist system on greed. After the demise of communism, greed was the only game left in town. The developed world was no longer balanced by its slightly shriveled, less developed twin system on the other side of the world: all those people living in a state of noble poverty, where ordinary cars and telephones were considered luxuries, where literature copied out in samizdat had a value that exceeded that of any currency. We didn't realize it at the time, but the capitalist markets of the West needed that other system as ballast to their greed. They needed it to give the wealth they generated meaning and dignity, to make it possible to equate wealth with freedom, wealth with democracy. Now, without that ballast, the ideals of freedom and democracy have somehow lost their shimmer, and all that remains is greed.

Unlike many, I feel no schadenfreude when the mighty—or the merely wealthy—fall. I do not like to think about my arrogant former colleagues from Lehman Brothers and Merrill Lynch going home to their wives to tell them that they've lost their job, their pension is gone, their life savings wiped out. I do not think these people are so very different from you or me. I do not think they are evil. They are simply more successful in the system of greed that we have all embraced to one degree or another. I also do not believe that greed and luxury are the specific exports of America hoisted on an otherwise untainted world. Or that modern capitalism invented excess. One need look no further than the royal courts of feudal Europe to see otherwise. And the human lust for more, more, always more, is expressed in ways that are not necessarily monetary. We don't need an economist to liberate us from this state of affairs: We need a philosopher. We need more than new financial regulations: We need a new language.

I am no nihilist. I fear poverty and decline as much as the next person. I have lived roughly half my life span and can see old age somewhere in the middle distance. Like most people past a certain age, I have become more cautious. My one radical life change—moving from New York to Slovenia, tossing out one career and having no idea what the next would be—is behind me, and I doubt I would have the courage for another one. I have children who can see their adulthood in the middle distance, and I want them to have a happy and prosperous future. So though logic and equilibrium would dictate that the twin towers of greed and fear must both be obliterated in order for a truly new system to emerge—that, as the economist Joseph Stiglitz suggested, Wall Street's meltdown is to capitalism what the fall of the Berlin Wall was to communism—I still hope for a reprieve. I hope that the measures taken by the very visible (and very clumsy) hands of Bush and his team of panicked free marketeers will stem the final collapse. Because at least when communism went under, all those jumping ship had another ship to jump to: a lifeboat, an economic and political system that many had viewed as their salvation for years.

Now we have nowhere to jump.

Just the void.

Erica Johnson Debeljak is the author of the memoir Forbidden Bread, forthcoming in April 2009.