Sociological Forum, Vol. 25, No.

2, June 2010
DOI: 10.1111/j.1573-7861.2010.01182.x

Wall Street Scandals: The Myth of Individual Greed1

Laura L. Hansen2 and Siamak Movahedi3

There is rarely an introductory text in sociology that does not begin with C. Wright Mills’s (1967)
distinction between personal troubles and structural or public issues. To lack sociological imagination
is to confuse between these two levels of analysis in trying to explain public issues in terms of per-
sonal troubles, or history in terms of the individual’s biography. ‘‘Troubles occur within the character
of the individual and within the range of his immediate relations with others; Issues have to do with
matters that transcend these local environments of the individual and the range of his inner life’’
(Mills, 1967:8). Issues are generated in response to the dynamics of the social system and unfold
within the larger structural and historical contexts where the character of the individual takes shape.
Yet, the most popular explanation of the contemporary financial crisis with its disastrous social and
economic consequences is personal greed. It is the greedy investment bankers, corrupt politicians, and
unscrupulous lobbyists who are to take the brunt of the current economic meltdown in the United
States. A few bad apples on Wall Street have created havoc on Main Street. Here, one may argue
that greed that—if not kept in check—which seems to afflict almost everyone, transcending social
class and status boundaries, may be a public issue—a structural problem—rather than a problem
within the character of the individual. Not to be greedy within the contemporary social and economic
system may be considered pathological, an instance of personal trouble.

KEY WORDS: crime; culture; economy; greed; scandals; social networks.

One of the most popular explanations of the contemporary financial crisis

with its disastrous social and economic consequences is personal greed, a
‘‘selfish’’ pursuit of ‘‘self-interest’’ that has no recognition of others at its
boundaries or limits and involves no connection between satisfaction and
further pursuit of attainment (Greenberg and Mitchell, 1983; Hegel, 1977;
Levine, 2001). It is the greedy investment bankers, corrupt politicians, and
unscrupulous lobbyists who should take the brunt of the current economic
meltdown in the United States. A few bad apples on Wall Street have created
havoc on Main Street. Millions of ordinary victims of subprime investment
and mortgage scams who have lost their houses to foreclosures and become
homeless have not escaped the accusation of greed and pure stupidity for what
has happened to them.
1
An earlier version of this article was presented at the 2009 Annual Meeting of the American
Sociological Association in San Francisco.
2
University of Massachusetts, Boston; e-mail: laura.hansen@umb.edu.
3
University of Massachusetts, Boston; e-mail: Siamak.movahedi@umb.edu.

367

 2010 Eastern Sociological Society

368 Hansen and Movahedi

Greed does not seem to be exclusively a twentieth- or twenty-first-century

phenomenon, nor is the concept of portfolio diversification, particularly in the
case of financial crime. In Christianity, greed is the second in severity among
the Seven Deadly Sins. Paul, the first Christian, declared the love of money as
the root of all evil—radix omnium malorum avaritia (Tickle, 2004). Indeed,
there has never been a time in history when greed did not play a role in the
exchange relationships of individuals, particularly if money was involved
(Simmel, 1978). Names, such as Jay Gould, represent some of the more noto-
rious scandals that took place on Wall Street prior to 1900.4 Thus Dennis
Levin, Ivan Boesky, Michael Milken, Bernard Madoff,5 and Robert Stanford
are not necessarily the most vilified names in the history of Wall Street. How-
ever, selective memories as well as some strategically placed endowments have
all but erased the shame due to the creative finances of the Robber Barons
and other morally questionable participants in Wall Street scandals. It seems
rather sad that human greed has been and continues to be getting in the way
of smooth operation of the social, political, and economic system. Foreign
financial markets have not escaped scandal attributed to greed, nor have they
escaped growing pains. Insider trading was not even banned until the 1980s in
England and is not considered a crime in Germany or Italy (Forman, 1989).
By coincidence, France, like the United States, suffered from insider trading
scandals in the late 1980s, but without consistent prosecution.6
There is rarely an introductory text in sociology that does not begin with
C. Wright Mills’s (1967) distinction between personal troubles and structural
or public issues. To lack sociological imagination is to confuse between these
two levels of analysis in trying to explain public issues in terms of personal
troubles, or history in terms of the individual’s biography. ‘‘Troubles occur
within the character of the individual and within the range of his immediate
relations with others; Issues have to do with matters that transcend these local
environments of the individual and the range of his inner life’’ (Mills, 1967:8).
Issues are generated in response to the dynamics of the social system and
unfold within the larger structural and historical contexts where the character
of the individual takes shape.
The source of the confusion between these two levels of analysis seems to
reside in people’s ideological souls. A trained incapacity to look outside of
one’s narrow perspective seems to afflict even some leading economists. To
Martin Feldstein, the Harvard economics professor and the former Chairman
of the Council of Economic Advisors, the chief advisor to President Reagan

4
As the cost to investors and as the price of Western Union plummeted under the cry of monop-
oly, ‘‘Gould and his short-selling colleagues reputedly made a million dollars each when they
covered their positions’’ in the face of a bear run on the stock (Geisst, 1997:95).
5
Ironically, Stephen Greenspan, a psychologist and author of Annals of Gullibility: Why We Get
Duped and How to Avoid It (2008), fell victim to Madoff’s scheme (Here and Now, WUBR,
1 ⁄ 13 ⁄ 09).
6
As noted by Pierre Bezard, the COB [Commission des Operations de Bourse], France’s
counterpart to the SEC, had been in operation for 22 years and had ruled on fewer than 30
insider-trading cases (Los Angeles Times, 1 ⁄ 18 ⁄ 89).
The Myth of Individual Greed 369

and the architect of the Reagan and Bush policy of deregulation, the ongoing
economic disaster has nothing to do with the right-wing political economy of
a free market. He blames the whole fiasco on a few incompetent bureaucrats
and some technical screwups.7
In his inauguration speech on January 20, 2009, President Obama raised a
number of questions about the structure of government and the economy. Being
an ardent critic of deregulation, he called for a new era of responsibility under a
watchful eye. Martin Feldstein agrees with President Obama about the need for
a watchful eye. However, to Feldstein, ‘‘a watchful eye’’ is a matter of personal
trouble rather than a structural issue. He hears through his ideological ear that
President Obama is advocating elimination of too many watchful eyes (deregula-
tion) in favor of only one eye! ‘‘I think it was right for him to use the watchful
eye, this goes back to what I was saying a minute ago about too many watchful
eyes who didn’t do their jobs’’ (National Public Radio On Point hosted by Tom
Ashbrook, Monday, January 26, 2009 at 10:00 a.m. EST). In response to a ques-
tion by the frustrated Tom Ashbrook: ‘‘[H]as this terrible economic crisis not
given you a pause that there is something in the ethos of economics that you
have championed that leads to nobody minding the store?’’ Feldstein responds:
you said the right words—nobody minding the store. We had in the financial sector
three people minding the store and each saying I am not the guy with the bottom line
responsibility … what I hope to come out of this is to have only one single supervisor
for the entire financial institutions …. (National Public Radio On Point hosted by Tom
Ashbrook, Monday, January 26, 2009 at 10:00 a.m. EST)

Here, one may argue that greed—if not kept in check—which seems to
afflict almost everyone and transcend social class and status boundaries, may
be a public issue—a structural problem—rather than a problem within the
character of the individual. No to be greedy within a particular social and
economic system, say, capitalism, may be a pathological manifestation, an
instance of personal trouble.
Greed, as the egoistic pursuit of self-interest, reminds us of Durkheim’s
structural analysis of anomie. Anomie is a social structural condition, a condi-
tion that allows the individual’s insatiable passions and appetites to operate
with little external limits or regulation to harness them. In such condition,
‘‘greed is aroused,’’ according to Durkheim (1951:256), ‘‘without knowing
where to find ultimate foothold.’’ Although the recent deregulation legislated
in the name of the ‘‘free market’’ may have contributed to the weakening of
structural constraints on people’s insatiable appetites, the ‘‘boundless greed
after riches,’’ as noted by Marx, is the defining feature of the current economic
system and is by no means irrational or pathological.
7
In a recent interview on BBC at 2100 BST on September 10, 17, and 24, (2009, rebroadcasted)
Alan Greenspan said he had changed his mind about deregulation. He blamed the crisis on the
financial industry’s inability to monitor itself, but he added that ‘‘speculative excesses’’ are a
normal function of capitalism. Yet, he attributed much of the problem to human nature: ‘‘It’s
human nature, unless somebody can find a way to change human nature, we will have more cri-
ses and none of them will look like this because no two crises have anything in common, except
human nature.’’
370 Hansen and Movahedi

This boundless greed after riches, this passionate chase after exchange
value, is common to the capitalist and the miser; but while the miser is merely
a capitalist gone mad, the capitalist is a rational miser (Marx, 1967:153).
In fact, as Zakaria (2009) writes in his Newsweek article, ‘‘The Capitalist
Manifesto,’’ market behaviors are not about morality. They are a manifesta-
tion of complex economic systems, and as such some greed is a necessary part
of capitalism. Ironically, ‘‘Greed is Good’’ was the arbitrageur Ivan Boesky’s
(the convicted insider-trading felon) encapsulated message of his May 18, 1986
commencement address to the UC Berkeley’s School of Business Administra-
tion. Boesky’s exploits were later fictionalized in the Hollywood movie Wall
Street, which included a speech given by a Boesky-like character on the virtues
of greed similar to that given in the commencement address.
Greed in the early years of Wall Street and banking in the United States
was attributed to the lack of a central bank, allowing more opportunity for
devious investments. Banks and bankers, like the Robber Barons, earned less
than stellar reputations. As World War I approached, bankers were accused
of being plunderers and noncontributors to the building of the U.S. economy.
As Geisst (1997:124) noted, ‘‘it was the combination of wealth and concen-
trated economic and political power that eventually made them such a vilified
group.’’ In spite of the animosity exhibited toward the banking community,
and Congress’s push for a new central bank in response to public pressure
(actualized in 1913), banking continued to flourish through the 1920s, enjoying
a relatively friendly regulatory atmosphere.
The question of structural determinants of behavior—here, economic
behavior leading to scandals on Wall Street—needs much more unpacking
than what we typically do in most sociological analyses. Social structure by
itself is not causally efficacious. Intervening variables and processes that need
clear articulation are usually taken for granted. Speaking on the importance
of communication in forming people’s political consciousness within a particu-
lar mode of production, Mills (1951:333) writes:
If the consciousness of men does not determine their existence, neither does their mate-
rial existence determine their consciousness. Between consciousness and existence stand
communications, which influence such consciousness as men have of their existence.
Men do ‘‘enter into definite, necessary relations which are independent of their will,’’
but communications enter to slant the meanings of these relations for those variously
involved in them.

Although Mills here is referring to the contents of communication media

on the macro level, his argument equally applies to micro-level communication
within dominant social networks. In examining corporate crimes, it is neces-
sary to examine more than the macrostructure. The microstructure, formal
and informal, is perhaps more crucial. It is made up of corporate actors, some
of whom are caught up in the moral mazes of conducting business in the inter-
est of the company and yet still acting ethically in a changing environment
(Collins, 1975; Jackall, 1996; Meyer and Rowan, 1977). In fact, our data
from an extensive earlier study of Wall Street scandals clearly show the role of
The Myth of Individual Greed 371

communication within the networks of characters in the financial community

in structuring different patterns of white-collar criminality. The regulatory part
of the market structure, the competitive environment, the culture of Wall
Street, and the network of communication among bankers, traders, and inves-
tors interact to bring about the financial disasters that we are witnessing
today. Most scandalous forms of financial activity, such as insider trading,
subprime mortgage scams, or Ponzi schemes, are heavily embedded within the
legitimate financial banking network of Wall Street.8 The most striking
findings of a recent study conducted by one of the authors (Hansen, 2004)
suggests that the very Wall Street stars and innovators, such as Bernard
Madoff, the former chairman of the NASDAQ and founder of Bernard
L. Madoff Investment Securities, can also be on occasion the most deviant.9
What is insidious and difficult for scholars of white-collar crime to
research and for regulators to prevent is that corporate financial malfeasance
can at times appear to be accidental. Even when an incident is formally and
legitimately identified as an accident, it is often due to miscommunication
between management and technical advisors (Vaughan, 1996). In many cases,
organizational elites knowingly use the hierarchy and their organizational
positions to command deviance (Ermann and Lundman, 1996).
The competitive environment of the market economy, in addition to orga-
nizational group dynamics such as groupthink, conformity, obedience, and
submission, operate to elicit certain response patterns that may lead to finan-
cial crimes. In the 2005 documentary Enron: The Smartest Guys in the Room,10
the corporate climate of Enron was not unlike Stanley Milgram’s (1960) infa-
mous experiment on obedience. The book and subsequent documentary specu-
late that traders at Enron were aware that they were putting individuals at
risk for health-related illness and death by instigating rolling blackouts of elec-
trical power in California during the 100+ degree weather in the summer of
2000, and they continued to do so with the blessings of their supervisors.
8
During the free-wheeling days of deregulation under the Reagan Administration and prior to
the 1984 crackdown, one form of white-color criminality—insider trading—became more
tempting in a progressively more laissez-faire market. New liberalism in the market, the concur-
rent growth of funds, greater foreign investment, and high interest rates all resulted in corpora-
tions becoming a new source of capital. The new challenge for politicians was to control
merger activity. During the 1970s, the need for greater regulation was endorsed by both the
Republican and Democratic Parties, who favored strong antitrust enforcement, since there was
suspicion of ‘‘the ‘bigness’ associated with merger activity’’ (Stearns and Allan, 1996:705).
However, the Republican Party platform after the 1980 election advocated a ‘‘buyer beware’’
mentality. As Johnson (2003:193) observed, ‘‘an informed consumer making economic choices
and decisions in the marketplace is the best regulator of the free enterprise system.’’ This policy
resulted in the rush for deregulation early in the Reagan presidency.
9
Government tends to be reactive rather than proactive in fighting financial crime, largely due
to budgetary constraints. As Charles Carberry (former U.S. Attorney’s Office prosecutor and
debriefer of Boesky) notes, the ‘‘horse left the barn’’ mentality of prosecutors results in
increased law after criminal behavior has been identified, becoming draconian before law is leg-
islated (Interview, New York City, June 2003). Either way, the data will show that criminal
networks can and do exist within financial networks, though perhaps not as rampantly today
as the one that emerged in the 1980s.
10
Based on the 2003 book by Bethany McLean and Peter Elkind.
372 Hansen and Movahedi

The cultural environment plays a key role in providing both opportunity

and constraint for individuals in the banking industry. There are two means
by which the environment plays a part in shaping the way that investment
bankers interact with one another. The first instinct is to place importance on
the regulatory system. More importantly, it appears that the competitive envi-
ronment plays a greater role in offering opportunities. (Sauder and Fine [2008]
make a similar point with reference to business schools.)
Nevertheless, competition in the market does not seem to be a guarantor
of fairness, as predicted by Schoenberger (1997). Competition in the legitimate
market is the precursor of activities, such as exchange of insider information,
that reduce fair competition. With a limited number of actors privy to the
information, and an even fewer number of actors who use the information for
nefarious purposes, fair competition becomes null and void. For instance, it
was competition itself, as evident by the very few individuals involved in merg-
ers and acquisitions compared to the total number of transactions that took
place from 1979 to 1986, gave rise to the need for illicit information. This
coincides with Turk’s prediction (1966) that the demand for illicit goods and
services can result in a criminogenic subculture.
Furthermore, based on Hansen’s (2004) study of Wall Street, opportunity
gives way to embeddedness in both legitimate and illegitimate networks, with
different manifestations in each one. Legitimate network actors unexpectedly
become more embedded with the formation of cliques, dependent broker ties,
and reduction of structural holes. This is contrary to competitive economic
models. Illegitimate networks, on the other hand, become more centralized
and stringy, and reduce competition for the precious resource of information
by operating more efficiently than legitimate networks. The illegal network
represents informal structure sprouting from formalized professional ties. This
is an important finding for future research, as organized crime networks such
as the Mafia and motorcycle gangs do have formalized structure, even though
their roots are in informal groups. Likewise, white-collar criminal networks
are suggested to have the same social evolution, but in reverse: informal illegal
networks emerge from formal legitimate, professional networks.
The regulators themselves are under scrutiny, making the task of monitor-
ing malfeasance and crime within corporations doubly difficult. The Wall
Street Journal reports (May 16, 2009) that a network of alleged insider traders
within the SEC is under investigation. As Hansen (2009:36) notes, ‘‘regulatory
agencies alone cannot be depended on to provide prophylactic measures to
prevent corporate crimes.’’ And, as noted earlier, regulation globally is incon-
sistent. Corporations, international and otherwise, must be called upon to
identify the potential problems by identifying the informal structures within
the organization that have the potential of segueing to illegal networks, rather
than merely seeking out individual troublemakers. As demonstrated by the
pandemic insider trading during the 1980s, as well as by the Enron debacle,
indiscretion is often found within illegal network structures (Hansen, 2009),
including, if The Wall Street Journal is correct, the SEC.
The Myth of Individual Greed 373

In sum, the environmental pressures and competition, the culture and ide-
ology of Wall Street, the formal and informal structure of corporations, the
executive and employee compensation structures, all operating within the
broader regulatory system, are responsible for some of the scandals we are
witnessing. Any analysis of the present condition from the standpoint of
explanation, prediction, or prevention should be focused on the macro- and
micro-structural condition. Psychological explanations in terms of character,
personality, or traits such as greed are totally inadequate.
The problem with occupational crime is that it is committed within the
confines of positions of trust and in organizations, which prohibits surveil-
lance and accountability. More importantly, work performance is evaluated
by nonperformance criteria and evaluations are ceremonially executed, partic-
ularly, as previously stated, in the case of professionals who are technically
trained beyond the education and practical knowledge of management (Col-
lins, 1975; Meyer and Rowan, 1977). As such, the explanations for occupa-
tional crime are structural rather than social-psychological, as the
organizational apparatus creates an atmosphere conducive to occupational
crime. One theory that supports a structural model is that of Billingham
(1990), who proposed that criminality among elites may be part of ‘‘doing
business as usual.’’ As previously noted, the potential for the deviant behav-
ior of insider trading has been found to have its roots in business schools,
where students are more materialistically minded, particularly in U.S. univer-
sities (Billingham, 1990). A code of ethics does not necessarily prevent uneth-
ical behavior within organizations but, as Cressey and Moore (1980)
concluded, ‘‘[a] demonstration of deeds, not nice words, is necessary to cor-
rect unethical corporate behavior’’ (Clinard and Yeager, 1980:302). Corpora-
tions rarely make apologies for their bad behavior, except when pushed to
do so for public relations purposes.

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