Women's Role in the Financial Crisis - Building Gender Balanced Business

Did men cause the crisis? Would women have behaved differently? These are difficult questions to answer.

We do know that men dominated the top leadership positions in the banks, governments, and regulators, that all contributed to the mistakes that were made.

However, a few individual women stood out, which shows how they were involved both as courageous opponents of excessive risk-taking and as creators of the industrialised credit derivatives – the very products described by Warren Buffet as “financial weapons of mass destruction”.

The virtuous corner
So, in the virtuous corner we have Brooksley Born, Sheila Bair, and Mary Schapiro.

• Brooksley Born argued courageously for the regulation of Over the Counter derivatives trade when she was Chair of the US Commodity Futures Trading Commission (CFTC) in 1998. She was opposed by some powerful figures of the day, including the Fed Chairman, Alan Greenspan, and the Secretary of the Treasury, Lawrence Summers (now economic adviser to the President). Born lost this battle, to the detriment of the wider economy. The bloated multi-trillion dollar business in derivatives, in which the risks were hidden from view, was a principal cause of the crash of 2008.

• Sheila Bair, Chair of the US Federal Deposit Insurance Corporation, was a “lone voice in the wilderness” arguing against the excesses in sub-prime lending. Currently, she is fighting to make sure that the victims of the irresponsible lending are not left homeless.

• Mary Schapiro, the first woman to run the US Securities and Exchange Commission (SEC) is battling to ensure that the SEC wins the right to regulate derivatives. She is hiring former traders and academics instead of only accountants and lawyers. The new hires will bring a new understanding of the financial world and how to prevent failure within it.

In the other corner
In the other corner, we have a number of women who worked for J.P. Morgan in the 1990s (the most well known of which was Blythe Masters) in a small, close-knit team of derivatives experts. They helped to create the mass market in derivatives that later imploded. They cannot be blamed for the way in which other banks ignored the risks (to the bafflement of the J.P. Morgan creators). But it shows that women were amongst the leading players who helped to create a business that ended up contributing to the worst financial crisis in eight decades.

It will be left to historians to analyse the causes, a debate that is likely to continue for many decades to come. But we can already see that it is wrong to claim that either men or women caused the crisis. It was a human failing. We cannot know if the top people in the banks, regulatory agencies, and governments would have acted differently if there had been a greater proportion of women sitting at the table.

But it is reasonable to suggest from all the studies that a more gender balanced team would have been more likely to ask the difficult questions, see things from other perspectives, and pursue less popular policies.