Economic crisis – impaired brain function a major cause?

Top financial leaders have signs of disturbed brain function

Signs of impaired brain function appear to be common in leaders involved in the financial crisis. The signs are typical for the effects of chronic stress, which suppresses higher brain centers responsible for intelligence, judgment, foresight, ethics and emotional balance.

It will be argued that this may have been a major contributory factor to the present world crisis.

The behavior of top financial and political leaders

Financial commentators describe the behavior of American bankers and financial institute leaders in a strikingly similar way. It struck me that the pattern is typical of stress-related brain dysfunction.

Some illustratory quotes (headings set by me):

[Gigantic fraud by a former NASDAQ chairman]

[Bernard Madoff's].. story that for decades he ran his gigantic fraud by himself is unbelievable…damage done to so many smaller investor/savers, so many pension funds, so many charities…Madoff, his own businesses aside, was a major figure in the world of investments, of stocks and bonds and securities and exchanges. If the former chairman of Nasdaq is a crook, whom do you trust?

Nicholas von Hoffman, a Pulitzer Price Author of 13 books, including “A Devils Dictionary of Business”.

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[Crooks selling loans and doing accounting fraud in major banks]

“we find a perfect combination of financial and real estate fraud on a magnitude that helped establish some of America’s great founding fortunes, creating dynastic wealth that has survived down to the present day.”

Many of these loans are outright fraudulent. And they are being sold by crooks. Crooks who work for banks. Crooks who use accounting fraud .

Michael Hudson Economist, Wall street financial analyst. Research professor at the University of Missouri.

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[Out of control greed, massive fraud and irresponsible investments caused the present crisis]

[The preseent crisis is the] result of out-of-control greed for easy profits. Massive fraud to get them…Knowing Fed moral hazard will cushion them if they do…Fueling a housing bubble. Outsized consumer debt, and irresponsible investments free from government oversight. Fraudulent ones involving multi-trillions of dollars…Partnering with government to make it easy. Risking a global economic meltdown as a result.

Stephen Lendman Financial analyst.

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“I used to think of Wall Street as a financial center.
I now think of it as a crime scene.”
– Filmmaker Danny Schecter, Plunder (2009). Trailer here:

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For more about the severe criminality of the Wall Street financial leaders as well the corruption of the control organs, see the additions in the end of this blog.

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These quotes are representative of the widespread consensus among financial experts that criminally fraudulent actions at a large scale occurred in top financial circles. The quotes indicate  the presence of the following traits in the financial and governmental leaders involved in the activities that precipitated this crisis.

• irresponsibility,
• lack of foresight,
• dishonesty
• lack of empathy
• hyperegoistic greed

The behavior indicates impaired brain function due to stress

As explained in greater detail in my article “Stress and mind”, stress impairs the functioning of the brain to an important extent and “dehumanizes” people.

It suppresses the higher brain centers in the forebrain, that enable foresight, intelligence, and good judgment. Due to stress, the primitive midbrain centers govern behavior, leading to the following behavioral pattern (compare with the list above):

• irresponsible
• shortsighted
• dishonest
• unempathic
• hyperegoistic

An extreme form of egoism is insatiable greed for political power or money. An extreme form of this kind of behavior is called psychopathy. Actually, the callous ruthlessness, irresponsibility and dishonesty of the people involved here can hardly be found in others than mere psychopaths.

Chronic stress is very common

You may be surprised that the mentioned disturbance could be common in top leaders. But chronic stress is a very common problem.

Not until recently the real scope of chronic stress has been fully appreciated. Formerly it was believed that stress was mainly temporary, evoked by external factors, but the new insight is that the increase of the stress hormone level is continuos in many people. For example, it is now generally accepted in science that the major diseases are associated with chronic, persistent stress, including hypertension, where the connection is especially strong with 70% of all Americans having hypertension at the age of 70.

It is an established fact that persistent stress affects the brain so negatively that even anatomic changes have been found, for example in the metabolic syndrome (associated with hypertension and adult-onset diabetes) and the post-traumatic-stress-syndrome.

So it is not, after all, surprising that the behavior of top leaders and decision-makers indicate the presence of a dehumanizing brain dysfunction caused by chronic stress. What makes it especially serious in the case of leaders is that this brain disturbance suppresses the part of the brain responsible for intelligence, creativity, foresight and judgment. This appears as “functional holes” – inactive areas in this important part of the brain (the prefrontal cortex), see Brain imaging picture. Moreover the disturbed judgment is further aggravated by defence mechanisms that impair the ability to perceive the situation realistically, see “Stress and  Mind“.

Conclusion

It seems reasonable to suggest, that brain dysfunction due to stress has been a major reason why top political and financial leaders have developed and upheld a fraudulent financial system that was doomed to failure in the end.

Defence mechanisms and bad judgment may be the reason why severe and well founded warnings from competent experts like William R White, Chief economist at  the Bank for International Settlements (BIS) since the beginning of this decade (for example Securing sustainable price stability: should credit come back from the wilderness? – July 2004) the economist Michael Hudson in 2003 (The Coming Financial Reality) and Nouriel Roubini in 2006 (New York Times, Dr Doom).

Especially remarkable is the neglect of Mr White’s warnings.  As the chief economist of BIS, the  ”Bank of central banks” Mr. White was the topmost authority  in the international banking world. His warnings about an imminent crisis and his demands for increased regulation grew increasingly sharp since the beginning of this decade and were repeated with increasing emphasis every year. They were very well underpinned as BIS had statistics directly available from all central banks. Yet he was ignored by the leaders of the financial and banking world. Afterwards it has been noted that his predictions of the crisis were stunningly correct. See the article “Global Banking Economist Warned of Coming Crisis: The Man Nobody Wanted to Hear“.

Ignoring serious and repeated warnings of the world’s foremost banking expert indicates that the world top financial leaders had pronounced defence mechanisms, seriously bad judgment and a serious degree of irresponsibility – that is,  signs of pronounced chronic stress-induced Survival-Oriented-Behavior.

Therefore, all present and future political and financial leaders in the world must be tested for the presence of SOB, so that only persons are selected who are free from this serious disturbance. Only so can we ensure that key leaders will be able to sustain intelligent, responsible, empathic, realistic and foresightful leadership even under the severe stress of the now evolving very serious world crisis.

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Addition Oct 17 2009

A recent book by Danny Shechter, “The Crime of Our Time” amply documents the criminal actions of the Wall Street financial people.

Quotes from a review by Stephen Lendman:

“..according to former high-level government and Wall Street insider Catherine Austin Fitts in describing a “financial coup d’etat” that includes inflating multiple market bubbles, pump and dump schemes, naked short selling, precious metals price suppression, and active market intervention by Washington and the Fed that lets powerful insiders game the system, commit massive fraud, and be able to transfer trillions of public wealth to themselves, then get open-ended bailouts when the inevitable crisis surfaces.”

The Crimes of Wall Street

Schechter names many, including: – “Fraud and control frauds;– Insider trading;– Theft and conspiracy;– Misrepresentation;– Ponzi schemes;– False accounting;– Embezzling;– Diverting funds into obscenely high salaries and obscene bonuses;– Bilking investors, customers and homeowners;– Conflicts of interest;– Mesmerizing regulators;– Manipulating markets;– Tax frauds;– Making loans and then arranging that they fail;– Engineering phony financial products; (and)– Misleading the public.

According to the Treasury Department’s Financial Crimes Enforcement Network, over 730,000 instances of suspected wrongdoing, or 13% more than in 2007, including a 23% rise in mortgage fraud to almost 65,000 incidents.

By the numbers, they amount to:

– $994 billion in 2008 losses or a median loss of $175,000;

– financial institutions or government agencies accounting for 27% of the total;

Examples include “shady lending practices….deepening debt, exploiting customers, overcharging borrowers with arbitrary late fees, and imposing other hidden costs that bilk consumers.”

Source: Book Review by S. Lendman.

Addition february 2011

Rolling Stones magazine: “Why Isn’t Wall Street in Jail?”

This well researched  story complements the picture of Shechter quoted above.  It is reveals the corruption of the regulators and control organs enabling the Wall Street criminals to continue committing billion dollar crimes unpunished.  Not only the Wall Street, but the federal justice, regulative and control organs (SEC) apparently are populated by people with impaired brain function, enabling them to heartlessly disregard the severe human suffering of millions of people thrown into poverty through  these crimes.

A few excerpts:

“Financial crooks brought down the world’s economy — but the feds are doing more to protect them than to prosecute them”

“Not a single executive who ran the companies that cooked up and cashed in on the phony financial boom — an industrywide scam that involved the mass sale of mismarked, fraudulent mortgage-backed securities — has ever been convicted. Their names by now are familiar to even the most casual Middle American news consumer: companies like AIG, Goldman Sachs, Lehman Brothers, JP Morgan Chase, Bank of America and Morgan Stanley. Most of these firms were directly involved in elaborate fraud and theft. “

“But a veritable mountain of evidence indicates that when it comes to Wall Street, the justice system not only sucks at punishing financial criminals, it has actually evolved into a highly effective mechanism for protecting financial criminals.”

“”Criminal justice, as it pertains to the Goldmans and Morgan Stanleys of the world, is not adversarial combat, with cops and crooks duking it out in interrogation rooms and courthouses. Instead, it’s a cocktail party between friends and colleagues who from month to month and year to year are constantly switching sides and trading hats.

“You want to win elections, you bang on the jailable class. You build prisons and fill them with people for selling dime bags and stealing CD players. But for stealing a billion dollars? For fraud that puts a million people into foreclosure? Pass.”

“In fact, [this corrupt system is such as to] let them profit from their collective crimes, to the tune of a record $135 billion in pay and benefits last year. “

“But these frauds are worse than common robberies. They’re crimes of intellectual choice, made by people who are already rich and who have every conceivable social advantage, acting on a simple, cynical calculation: Let’s steal whatever we can, then dare the victims to find the juice to reclaim their money through a captive bureaucracy.”

Source: Why Isn’t Wall Street in Jail? by Matt Taibbi, Feb 16, 2011. The essence of it you find in this video video interview with Taibbi along with a transcript.

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