Sunday, March 07, 2010

"The Power of Yes" (or the Fear of Saying No)


In the Power of Yes a playwright tries to find out the causes and explanation for the financial crisis. David Hare populates the stage with bankers, hedge fund managers, MPs, lawyers, journalists and the occasional journalist. (Background pack here which includes a good timeline on the crisis.)

He asks them why this happened and Myron Scholes "explains" why the Black-Scholes options pricing theorem should always work. Long Term Capital Management is mentioned almost as a passing embarrassment. A minor blip on the smooth horizon of the derivatives radar. The fault of the 1998 Russian economic collapse not the model. Models play an unfortunate role throughout the crisis, whether it's Black-Scholes or the Gaussian Copula. They seemed to inspire unquestioning faith in their adherents.

As the various characters come forward to explain their roles or why they should be exonerated of blame, the playwright's anger, and hence ours, rises at the utter cupidity and stupidy of these City folks given such freedom by the regulators and government. One of them aptly says which government minister will willingly criticize the City when a warm seat on the board of an investment bank beckons when he steps down. They were frightened of saying no.

Gillian Tett--unnamed in the play but clearly recognizable--analyzes, perhaps the most hated man in the crisis, Fred Goodwin and his response to the collapse of RBS and the scorn hurled at him. He wasn't to blame; it was the fault of the market... Nor could he say sorry. (I've reviewed Gillian Tett's book on the crisis, Fool's Gold.)

The message of the play pushes the lack of responsibility by the main players in the system, their lack of acceptance of culpability, that they did anything wrong. Indeed William Keegan in the Observer noted, and this should send shivers down anyone's spine:

It is still not clear that the commercial bankers have appreciated the rightful degree of public anger. But central bankers have. In Istanbul (at an IMF meeting) Paul Tucker, the deputy governor of the Bank of England responsible for financial stability, told the Institute of International Finance: "We can't continue with a regime where, to put it crudely, the downside is picked up by the taxpayer and the upside is picked up by bank shareholders and executives."
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If you would like more information, Mark Thomas, a guerilla comic, has put together a fine video of his understanding of the crisis recorded at the National Theatre.

The play won't run much longer so go and see it--it's well worth it.
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