Nicholas Kemper’s Monday guest column (“For pirates and I-bankers, sinking inevitable,” 10/06) misrepresents the causes of the current financial crisis in an attempt to scapegoat financial professionals for a systemic failure.

Beginning with an analogy between investment bankers and pirates and concluding with a castigation of the entire financial sector, Kemper’s caricature is unclear. Indeed, recent events have revealed that misalignment of interests did and do exist in our financial system and that various parts of the structure and oversight of this system failed to mitigate them.

My intent is not to defend the bankers who created the securities known by acronyms, such as MBS or CMOs, now infamous for their role in our current predicament. I have seen firsthand how the relationship between the investment banks that create securities and the agencies that rate them falls short of the ideal. I am familiar with the ludicrous fees charged by investment managers, most of whom underperform and several of whom lost their shirts in the past year.

But it is unfair to blame the current crisis on any of these participants. Rather, it was the universal triumph of hope and greed over reason that is culpable for the woes we are now facing.

We have known this villain before; Greenspan coined it “irrational exuberance,” a description apt enough to serve as the premise of professor Robert Shiller’s book on the late 1990s stock-market bubble. This time, the exuberance began with brokers who took only the expectation that home prices would continue to rise as collateral on their riskiest mortgages. Exuberance compelled many homebuyers to speculate in real estate, grabbing profits with borrowed money as real estate continued to appreciate. It spread to the bankers who earned fees for packaging these loans and dealing them around the world, to the agencies that facilitated this process by trading high credit ratings for fees of their own, and to the fund managers who bought them without understanding exactly what they were buying.

The ‘finance bubble’ is not to blame for these imprudent decisions; irrational exuberance is.

Finance, as professor Shiller emphasizes in his course, is a technology. Like any technology, it can be used to achieve sociably desirable ends, such as homeownership. That financial services represent a fifth of GDP is testament to the importance of this technology to modern society and economy, not a cause to decry it. But so long as people, fallible as any other, employ these technologies, the potential for abuse will remain. Our mission is to rethink the parts of the financial system that allowed these abuses to occur and to find ways to prevent similar abuses in the future.

If the ship of modern finance has fallen to the Jolly Roger, our task is to board it and rectify its course. We cannot afford to sink it.

Zubin Desai

Morse College ’09