Synopsis
In "Infectious Greed: How Deceit and Risk Corrupted the Financial Markets," Frank Partnoy delivers a sharp, narrative-driven account of how the U.S. financial system unraveled in the late 20th and early 21st centuries, tracing the roots of major corporate scandals back to the 1980s. Partnoy, a former derivatives trader turned law professor, argues that a toxic combination of increasingly complex financial instruments, unchecked greed, lax regulation, and separated ownership from control allowed deceit to spread like an infection through Wall Street and corporate America.
The book chronicles a series of high-profile blowups—including Enron, WorldCom, Global Crossing, and others—showing how executives, bankers, accountants, and traders exploited derivatives, off-balance-sheet vehicles, and creative accounting to inflate earnings, hide risks, and generate massive personal profits while ordinary investors and employees bore the losses. Each new layer of financial engineering, Partnoy explains, not only obscured underlying problems but demanded ever more elaborate deceptions to sustain the illusion of healthy growth.
Partnoy structures the story as a progression from initial "infection" through "incubation" to full-blown crisis, highlighting how deregulation, weak oversight, and a culture that rewarded short-term gains over long-term stability enabled the rot to deepen. He warns that these trends were not isolated failures but symptoms of deeper systemic flaws, with private, unregulated markets for complex derivatives playing a central role in amplifying dangers that regulators and rating agencies often missed or ignored.
Ultimately, the book serves as both a cautionary tale about the perils of unchecked innovation in finance and a call for greater transparency, accountability, and restraint—insights that gained renewed relevance in the years following its 2003 publication as similar dynamics contributed to the 2008 financial crisis. Partnoy's insider perspective makes the technical details accessible while underscoring the human and ethical failures at the heart of the scandals.