Abstract
This chapter turns to the modern history of Wall Street, as seen through Bob's professional trajectory in the securities industry since the early 1980s. This trajectory included the growth of the derivatives industry, the disappearance of the partnership form, and deregulation. The chapter focuses on the derivatives scandals of the mid-1990s, leveraging Bob's experience at another major bank. Although largely overlooked, the 2008 crisis arguably had its predecessor in the derivatives scandals of 1994 and 1995. At the time, Wall Street banks signed over the counter derivatives agreements with corporations that resulted in sizeable losses for the latter. Also at that time, pioneering banks like Bob's began using risk management models as a tool for control and restraint rather than as a way to ascertain overall exposure. The mid-1990s crisis reveals the moral complexities posed by new and unfamiliar financial instruments, especially when the standards for prudent behavior are set by a mathematical formula such as Value at Risk. The chapter's analysis theorizes this dynamic with the concept of model-based moral disengagement.
Published Version
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