YOU MAY be wondering how it is that this week the financial industry, which was on taxpayer life support, announced it would be doling out more than $140 billion in bonuses to the very executives who created the mess in the first place. Or how it is that some of these same institutions recently began raising the interest rates on your credit cards to unprecedented levels. Or how it is that there are now reports of new and risky financial skulduggery afoot.
To answer these questions, it may help to consult the “Diagnostic and Statistical Manual of Mental Disorders,’’ the handbook for psychologists. The manual describes a broad category called “antisocial personality disorder,’’ which includes those whom we commonly describe as sociopaths. According to the manual, this disorder manifests itself, among other ways, in “deceitfulness’’ as indicated by “conning others for personal profit or pleasure’’; “irresponsibility’’; and “lack of remorse as indicated by being indifferent to or rationalizing having hurt, mistreated, or stolen from another.’’
One could easily make the case that Bernie Madoff, R. Allen Stanford, the subprime mortgage pushers, the derivatives dealers, and the rest of the Wall Street gang were all economic sociopaths who were actively hostile to the interests of the American people and wholly devoid of conscience. What they did was not just the result of miscalculation or even greed, but of something much deeper and darker.
Garden-variety sociopaths - say, rapists or serial murderers - are reviled and typically punished. But when economic sociopaths were plundering the country, they were being lionized as bold entrepreneurs, financial buccaneers, even rock stars. In the financial press, they were gods.
Even when the economy crashed, these sociopaths didn’t receive the full opprobrium they deserve, and they aren’t chastened. They continue to argue against any serious financial regulation or reform, and they continue to defend their obscene payouts on the grounds that the compensated executives are necessary to save the very economy they helped ruin. There is a Yiddish word for this sort of audacity: chutzpah.
Unfortunately, this isn’t a matter of a few bad apples or even of an entire barrel of rotten apples. The real and nearly intractable problem is that economic sociopathy isn’t an aberration on Wall Street. This behavior is the very basis of American finance.
Derivatives, credit swap defaults, complicated hedge funds, convoluted Ponzi schemes - these were all designed to make bankers richer with the added advantage that they were so complex they couldn’t be policed. The average American was never part of their calculation, except as a mark.
The prescription from the Obama administration has been tighter regulation and other reforms. But the likelihood that these would work, even if the administration were really serious about them (and, after all, Treasury Secretary Timothy Geithner and economic adviser Larry Summers move easily in the world of economic sociopaths), is small since the financiers are not only sociopaths, they are also known recidivists.
After the Great Depression, the Senate empanelled a committee headed by a respected judge, Ferdinand Pecora, to investigate Wall Street abuses. Pecora found many transgressions, including insider trading and buying stocks on minuscule margins, that were the equivalents of today’s economic chicanery.
As a result, the Roosevelt administration formed the Securities and Exchange Commission and passed regulations intended to make Wall Street clean up its act, with Wall Street, naturally, protesting all the way.
So what happened? What happened was that after 40 years of more or less good behavior and strong economic growth, the bankers became emboldened enough to suggest reducing New Deal regulation, which led, in turn, to last year’s meltdown. In short, you can’t keep a good sociopath down.
And therein lies the problem. Regulation may work temporarily. But Wall Street both attracts and engenders economic sociopaths, and they aren’t inclined to change. You don’t become an investment banker because you’re an altruist; you become an investment banker to make money, and the devil take the hindmost. Any true solution would have to be psychological, designed to attract different and less incorrigible individuals into investment banking - individuals with a conscience.
In effect, it would have to reinvent the system, not just reform it. To which one can only say: Good luck with that.
Neal Gabler is the author, most recently, of “Walt Disney: The Triumph of the American Imagination.’’ 
