Masters of the Universe but Slaves of the Market: Bankers and the Great Financial Meltdown

Abstract

Research Highlights and Abstract This article focuses on the banking crisis in the US and UK. It is essential to understand banker agency and the institutional and structural contexts which shaped such agency. Bankers experienced variegated patters of constraint and opportunity. At one level institutional theories that emphasise institutional constraint cannot easily account for the authority and agency enjoyed by key bankers. On the other hand, bankers were heavily influenced by institutional change in the shape of market ‘liberalisation’, which produced intense levels of competition and pressures to achieve higher profit returns: an exacting form of market discipline. Bankers and financiers in the US and UK modified institutions and revolutionised the banking industry prior to the 2007–8 crisis. These agents were however heavily constrained and eventually overwhelmed by institutional pressures and wider structural forces that encouraged high-risk leveraged trading and which generated systemic risk. To account for this, institutional theory needs to incorporate a broader canvas of conditioning contexts, particularly the impact of structural or systemic forces on agents and the way in which these are actualised as a form of ‘ecosystem power’.