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Tags: , cdo , cds , crisis , derivative , economics , finance , financial , mortgage , subprime , wall-street. Brian books friends. Michael books friends. Otis books friends. Ben books 71 friends. Themis-Athena Lioness at Large books friends. Maria books friends. Peter books 17 friends. Post a comment ». Oct 10, AM. I don't think I can vote for Too Big to Fail , since it didn't actually explain anything, or lead to improved understanding. After having read a ton about the financial crisis, I felt I had enough background to enjoy the minute-by-minute narrative.
Sorkin obviously made no attempt at analysis in the book, which is why it was such a treat. I felt like we had access to the decisions being made and how they were made. Scary, enlightening, mostly just scary. When it comes down to it, I feel much more under an oligarchy than I like to think So I totally hear your perspective here: it's not really going to help anyone gain understanding of the crisis, just maybe understand how Goldman Sachs our government and big banks reacted in panic mode.
I'm actually so surprised that I'm the only one who voted for The Age of Turbulence Yes, it was written before the crisis, but Greenspan's attitude and much of the SEC was a big part of setting the stage for the crisis.
I mean, he makes claims that have within the past 5 years have been proven absolutely false! I'm not sure if he's naive and truly believed that employees act in the best interests of the companies they currently work for, or if he's just pro-greed, dogmatically anti-regulation.
Those claims led, for example, to legislation explicitly barring regulation of certain now-toxic assets. But anyway Oct 10, PM. I agree with you, on everything you say, pretty much. Sorkin wrote a certain type of book, and that type of book is not without value. The blow-by-blow book, focusing on the personalities, all synthesis, no analysis. Unless you count a couple paragraphs in the epilogue. After reading it I feel like I have a much better sense of the actors involved - who was greedier, who was more willing to act for the collective good, who had serious narcissistic personality disorders, who was dumb and incompetent, who was smart.
No book can be everything, and a publisher working with an author will design a book not to be too duplicative of other books already out there, or in the works. Of course, Sorkin's book was one of the first out there. I'm sure you are right about The Age of Turbulence , but I need to have read a book before voting for it. I thought about adding When Genius Failed but I didn't. Oct 31, AM. The crisis was caused by central banking. The man who predicted the crisis before it happened, Peter Schiff.
Ron Paul predicts housing bubble in Mark Thornton calls housing bubble in Oct 31, PM. Jay wrote: "The man who predicted the crisis before it happened, Peter Schiff. Arthur Laffer, Ben Stein, and the other mopes on those shows sound like complete idiots. And yet their careers go on! No consequences for being so dismally wrong!
Ben Stein: "Subprime is a tiny, tiny blip Heh, I think a lot of people saw the crisis coming. I see the argument that the Fed created the conditions for this particular crisis, but I don't think that means we'd be better off without it.
I'd rather not have a crisis every 30 years or so see pre-Great Depression. I'd actually rather see more responsible compensation for people creating short-term value for themselves and huge long-term risk e. I have no idea how this can be fixed, but I don't think it has anything to do with the Fed, perhaps not the regulatory bodies as well sounds great to be able to regulate all of these crazy financial products, but that's probably not practical Given that many of these corporations are back to record profits, I'm not sure they see any downside to what happened if you think I'm anthropomorphizing, see Citizens United v.
Federal Election Commission. So I can't expect that these banks will change their compensation structure to reward for the long-term results of the actions of their traders and even if they were motivated, these financial innovators would leave for somewhere with an appropriately myopic approach to compensation, rinse, repeat. Restoring Financial Stability: How to Repair a Failed System is the first I've read to at least attempt to suggest how we can effect such change.
But it's not as actionable as I'd hoped well, written by a bunch of academics, so what would we expect ;. I'm open-minded, so If I can stand it, I may try to read something by Ron Paul to see what he thinks would fix this situation, but I have extremely low expectations, and have low tolerance for dogmatic arguments. I would read Ron Paul for chuckles perhaps, but I can't take much he says seriously.
Even if it were desirable to travel back in time to , it's not really possible. On changing compensation practices, I'm trying to remember which books talked about it. Maybe Stiglitz, in Freefall. Johnson and Kwak in 13 Bankers argue for limiting bank size to a dollar amount of assets. Increased competition will reduce the margins on fee-driven businesses such as securitization, trading, and derivatives, putting pressure on large banks' profits.
A larger group of competitors will also make it harder for major banks to divert such a large proportion of their profits to employee compensation; bonuses for traders and investment bankers should fall from the historically obscene to the merely outrageous. Brian wrote: "I see the argument that the Fed created the conditions for this particular crisis, but I don't think that means we'd be better off without it. There is a mountain of literature on this topic.
Allowing banks to not pay their creditors when ever they don't feel like paying is not a free-market. The shortest intro. See chapter two. Here is an entire book on the panic of There has never been a free-market in banking. Austrian Economists have predicted virtually every major financial disaster in the last years, including the great depression. No other theory is a serious challenge.
Keynesianism is, quite frankly, a joke. Lobstergirl wrote: "Johnson and Kwak in 13 Bankers argue for limiting bank size to a dollar amount of assets. Jul 23, AM. I would add Bagehot's classic Lombard Street since both Bernanke and Geithner said it was essential reading. Add a reference: Book Author. Search for a book to add a reference.
We take abuse seriously in our discussion boards. Only flag comments that clearly need our attention. We will not remove any content for bad language alone, or being critical of a particular book. Add books from: My Books or a Search. This book is significant for its insight into the vision and courage of contrary investors.
Short selling is lonely work because one is betting against the over-optimism of the crowd. The market can stay irrational longer than you can stay solvent. Today, with benefit of hindsight, we see what few saw then: a massive over-pricing of mortgage backed securities. The people on the other side—the entire financial system, essentially—had gambled with the odds against them…. All the Devils are Here: The Hidden History of the Financial Crisis is an excellent survey of the decades-long innovations in government policy and the business behaviors they elicited.
The narrative of this book ends just before the collapse of Lehman in September , which is fortunate in that it helps to focus the reader on antecedents that in other books are easily eclipsed by the high drama of autumn Richly documented from interviews and well-written, Too Big to Fail by Andrew Ross Sorkin gives the best summary of the agonies of business and government leaders at the epicenter of the crisis in On the other hand, it cannot be denied that federal officials—including Paulson, Bernanke, and Geithner—contributed to the market turmoil through a series of inconsistent decisions.
What was the pattern? What were the rules? The U. He documents evidence of a considerable economic return from the rescues. Meanwhile, as the U. This is one of the best treatments of the international dimension of the financial crisis, well documented from field interviews and vividly drafted.
The important insight is the extent to which the European crisis was not simply imported from the U. Nicholas Sarkozy among others seared the U. Irwin is largely sympathetic to the pressures and dilemmas faced by the modern alchemists—central banks work best as purely independent agencies but too often fall prey to the political interests of their overseers, such as inflating the money supply in advance of elections. The divergent interests of Northern European countries and those in the south strained the independence of the ECB.
And believe me, it will be enough. One can celebrate the audacity of his narrative of the crash, stretching from the Nixon shock of through to the administration of Donald Trump in The book is an impressive synthesis of reporting and analysis by others.
Tooze colors his narrative with sentiments redolent of an older ideology: capitalism is exploitation, the crisis manifests class conflict in the tottering globalist economy, and corruption and conspiracy among the elites caused the crisis.
Crashed is foremost a polemic, never in doubt but only sometimes right. Modern historians mock memoirs as exercises in self-justification. However, these books lend grounded perspective. It is too easy to lose sight of the motivations, dilemmas, and stresses of real decision-makers when one studies macro-history. I count some 14 memoirs of the crisis period, of which several stand out for notable substance delivered well.
Geithner is the most articulate advocate of the controversial view that to prevent another Great Depression, the government first had to rescue distressed institutions, let executives collect their bonuses, and inject billions into financial markets: reform and relief for stricken homeowners and the unemployed would have to come later, after the system was stabilized. Yet ten years later, this priority of rescue over relief still generates more light and heat in coffee shops, cocktail parties, and classrooms than any other aspect of the crisis.
His special contribution is the comparison between the crisis of and the Great Depression. As Fed Chairman during the crisis, he took enormous heat for his innovations in Fed policy. In it, one encounters Paulson as the dynamic action-hero, an excellent complement to the more reflective Bernanke.
At times stubborn and domineering, the book also gives glimpses of a man who was vulnerable and humble. Perhaps he decided too much too soon. Historians will judge after the archives open years from now. Some 60 pages of the book are devoted to his reflections on the origins of the crisis and on the passage of the Dodd-Frank Act. Throughout these narratives, the elephant in the room is the growing polarization in Congress-Frank, being an unapologetic partisan himself, hesitates not to finger conservative Republicans for the Sturm und Drang around these events.
I recommend the book for students interested in public service as a source of insights into the challenges of legislative initiative during a crisis. Even though most people do not recall the specifics of this fiasco today, the deep resentment it triggered remains embedded in their minds. I am convinced it is one of the reasons that TARP, which staved off total economic collapse and did not end up costing taxpayers, remains so reviled.
The memoirs of two most-senior U. George W. Yet Cheney gives an interesting perspective on the meeting at the White House on September 24, between the two presidential candidates, John McCain and Barak Obama. He affirms that the monetary crown does not rest easy on the brow of a financial leader. Volcker once derided financial innovation as a contributor to the crisis he said the ATM was the most useful financial innovation  but gave no further comment here.
One hankers for more color, more scoop, and more insight into policies for future crises. Volcker affirms a commitment both to zero inflation and to the Democratic Party—it would be fascinating to learn how he squares that circle. One imagines a cigar in his hand as he dictated into a recorder. Critics from Asia and the emerging economies are quick to point out that this was a North Atlantic crisis, not a global crisis. Europe has produced at least two compelling memoirs of the financial crisis—one from the UK and the other from Greece—that, despite their disparate contexts, yield similar tensions and settlement of scores.
We are witnessing a power shift—certainly economic and increasingly political—that will not be reversed and which we in the developed economies have yet fully to appreciate, or even fully understand. The effects could so easily have been far worse. My deepest regret is that, during the election, the government failed to capitalize on our successful handling of the financial crisis, and for that I accept my share of responsibility.
The book focuses on his failed negotiations to replace the bailout terms with a new debt reduction scheme. At that point, his prime minister, Alexis Tsiprias, dumped him. As a latecomer to the Greek disaster, he is perhaps to be forgiven for understating the extent to which the Greeks were the authors of their own fate: legendary economic inefficiency, endemic corruption, willful book-cooking to under-report the national deficit in It reads like a thriller and warrants top honors for elegant prose.
Once begun, it will be difficult to put down. Read it with ouzo. These memoirs yield rich insights about the difficulties of mobilizing collective action in a crisis. Solutions to financial crises are not engineering solutions, finely wrought outputs of economic models.
Instead, they are bargaining outcomes, in which influence, communication, threats, bluffs, cognitive biases, and risk aversions affect the collective decisions. Compare the narratives of Geithner, Bernanke, Paulson, and Bair at pivotal moments in the crisis.
At Lehman weekend, Paulson loudly insisted that no taxpayer money would be used, but Geithner and Bernanke seemed to hesitate. At the bidding to take over Wachovia, Geithner wanted the sale to Citigroup, but Bair and the others backed Wells. Yanis Varoufakis wanted to take Greece over the brink to Grexit; his prime minister, Alex Tsipras did not. Alistair Darling and Mervyn King fought over different estimates of growth and stimulus in markets.
Given such drama, it is a wonder that we emerged from the crisis at all. The memoirs show why conspiracy theorists are wide of the mark: the decision-makers were not clones; they differed often sharply over policies and procedures; they valued aims of rescue, relief, reform, and recovery differently. And they candidly revealed the high stress associated with their professional burdens.
Histories and memoirs take you only so far. At the end of it all, one hungers for meaning. Why did the crisis happen? What should we do differently hereafter? The serious student of the crisis can consult an immense recent literature of analysis and prescription. Here is where the crisis rubber meets the analytical road.
At least four themes stand out to explain the crisis and direct us forward: overconfidence, the abuse of leverage, the failure of governance, and the consequences of austerity. First, overconfidence biased the decisions of consumers, investors, business executives, and government officials.
Investing in real estate seemed like a sure thing; prices had only one way to go up. Robert Shiller won the Nobel Prize in economics for his pioneering work on that. Along these lines, a new book by Nicola Gennaioli and Andrei Shleifer, A Crisis of Beliefs: Investor Psychology and Financial Fragility , builds on a distortion of beliefs about future economic performance that is based on a kernel of truth. Prior to the crisis, investors observed rising home prices and tended to extrapolate past home prices upward into the future and to disregard possible downside risks.
Good macroeconomic news makes good future outcomes more representative, and therefore over weighted, in judgments about future states of the world. The converse is true for bad macroeconomic news. Their model accounts for the sudden pivots in investor behavior in The book is wonkish in certain chapters, which the general reader can skip without loss of the argument. My hunch is that natural language processing, data analytics, and machine learning will have big impact here.
The books of Yale professor, Gary Gorton, help to illuminate why overconfidence reliably precedes financial crises. Episodes of confidence breed blissful unawareness. Banks are complex institutions, making it difficult for depositors and investors to discern the condition of those institutions.
Therefore, the lenders to bank tend to be sleepy in normal times. The sleepy creditors quickly become information sensitive and with the arrival of adverse news, they begin to run. Two popular solutions are to strengthen the information insensitivity of bank liabilities by increasing the capital base of banks or by enlarging government guarantees of those liabilities. However, Gorton argues that the problem of runs on banks is not capital adequacy; it is illiquidity. This, he says, is the error of misunderstanding systemic crises, and one that drives misplaced measures of systemic stability.
A related problem is that in the worst runs occurred mainly outside of the regulated banks, in the shadows among dealer banks, where regulators were not expecting them. The second main lesson is that governance writ broadly failed us. Regulators slept; private watchdogs did not bark; CEOs and boards of directors chased returns while ignoring risks; and market discipline proved lazy. Activity moved from the sunlight into the shadow financial system, where guardians could not see.
Financial innovations deepened linkages among firms and made it harder to know what was going on. That regulators themselves render some of these criticisms acknowledges the gravity of the message. The remedy is simply to break up or nationalize the large banks—both to reduce their threat to the stability of the financial system and their economic power to capture the regulatory machinery. Or perhaps the failures of governance result from the very efforts to regulate.
At its peak, more than 20, institutions—most of them small and undercapitalized—constituted the financial system making it was profoundly vulnerable to systemic shocks. Those outcomes, in turn, determine how well the country will perform along two key dimensions: the degree of private access to credit and the propensity for banking crises.
Philip Wallach confronts the profound tension that is latent in debates about the correctness of government responses to the financial crisis. Some critics assert that bailouts and other actions were illegal and inconsistent with Congressional acts and even the Constitution.
But Wallach points out that the long history of government responses to financial crises reveals a certain amount of flexibility especially in moments when it is impossible to distinguish insolvency from illiquidity. This book is a bracing exploration of resilient governance. Congress delegates authority to expert agencies because it has neither the time nor expertise to deliberate on setting and enforcing specific rules for society.
Nevertheless, in the instance of the financial crisis of , the improvisations of central bankers stunned the democratically elected representatives of the people to ask whether the delegated powers should be reined in. With the exacting care of an engineer, Tucker develops design criteria and precepts with which a democracy could confidently yield authority to independent agencies such as central banks.
Because it relies on a sustained regime, credibility requires legitimacy, which in turn requires delegation via carefully constructed frameworks, ongoing oversight and public debate. Martin Wolf, however, is less sanguine about such prospects.
The third main lesson of the crisis is that borrowers abused financial leverage. Financial firms operated on thinner capital bases. Homeowners borrowed against the equity in their homes and borrowed more to speculate in condominiums and second homes.
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The nine titles listed below each earned two or more votes, and were recommended among almost recommendations. A majority of the experts I spoke with said that for a dramatic, readable account of why the crisis happened and how it was dealt with, check out Too Big to Fail by New York Times business reporter and columnist Andrew Ross Sorkin.
Through unprecedented access to key Wall Street protagonists, Sorkin tells a blow-by-blow story of the events of the crisis when Lehman Brothers crashed. This chronological narrative packs a comprehensive overview to the key events, people, and themes into a fast pages: How did we ever get into such a mess?
What was done to mitigate the problems of the financial crisis and why? Lucid, tough-minded, and written with real verve. By spotlighting the personalities of key players, this book succeeds in synthesizing the complex interrelationships of Wall Street, Main Street, the Fed, and the Treasury Department, which came to a head in Books written by leading actors of the financial crisis are generally seen as unpersuasive, seeing that they unavoidably offer a self-serving point of view.
Still, Tim Geithner, who served as Treasury secretary before, during, and after the crisis, manages to narrate his experiences from inside the D. If you have ever wondered why household debt features so prominently in debates on the causes of the crash and how to bubble-proof the economy from the next crisis, then read this book by economists Atif Mian and Amir Sufi.
You should come to this book already familiar with key aspects of the great financial crisis: the housing bubble together with the peddling of subprime mortgages to vulnerable householders, the triumph of free-market ideology followed by deregulation, and so on.
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We update links when possible, but note that deals can expire and all prices are subject to change. Every editorial product is independently selected. Chapters presents the history of financial crises while Chapters comment on the evolution of the modern global financial system and its features. Krugman introduces a brief historical account of the economic crises he will later present and discusses how he aims to present his book. Krugman establishes his thesis — depression economics has returned.
A historical account of the rise of capitalism and fall of socialism is given, and the subsequent economic success is attributed to this. Krugman mentions the Federal Reserve policy , Robert Lucas and Eugene Fama as key proponents of these neoclassical economic ideas, but argues they contradict current economic conditions. Krugman criticises the misguided policies during the Mexican Tequila crisis from the ss that lead to an economic contagion throughout Latin America. He suggests that the overvalued currency in the s and insufficient devaluation in the s lead to the economic disaster.
A timeline and sequence of events of the Mexican tequila crisis and its spill over into Latin America and Argentina are presented. Economic reforms in Argentina and Mexico led to an overvalued currency, and efforts to hamper currency speculation with a devaluation was insufficient resulting in the economic crisis.
Krugman uses the liquidity trap in s Japan to signal the return of depression economics. An idea the liquidity trap , not acknowledged by neoclassical and orthodox economist. Krugman suggests that despite Japan being the second largest economy at the time, and a creditor nation , financial liberalisation, and deregulation in the s led to deflation and a recession.
As a result, low interest rates rendered monetary policy ineffective in stimulating economic growth. Instead, Krugman recommends printing money to increase inflationary expectations and encourage more consumption. Krugman highlights how the combination of poor investments, low interest rates and increasing deregulation, increased dependence on foreign currencies and lead to bank runs.
Krugman explains how an influx of capital into emerging Asian markets was mostly directed to speculation instead of infrastructure development. He emphasises the self-validating panic within the Asian economies and advocates for swift government intervention. Krugman criticises International Monetary Fund and US Treasury policy response to the Asian Financial Crisis which focused on managing speculation and restoring market confidence.
This misguided policy, Krugman suggest, urges reduced fiscal expenditure, increased taxes, and interest rates. In response to the GFC, Krugman suggests complex financial innovations, derivatives, and short sales are to blame. He critiques the social structures and governing bodies in America for their flawed models of long-term capital management. He provides insights into the role of hedge funds in the Asian financial crisis and George Soros and the British Pound and Ruble.
Krugman stressed the importance of government intervention in these scenarios for preventing full scale panic. Krugman attributes blame to Alan Greenspan for the Dot-com and housing bubbles in the early s. He details the flourishing economic conditions in which Greenspan became the chairman of the Federal Reserve and his subsequent reluctance to raise interest rates.
Consequently, loose monetary policy led to irrational investor behaviour and the stock bubble burst. This shadow banking system was the root of the global financial crisis and current financial crisis and as such should be regulated. Here, Krugman strongly advocates for fiscal expenditure, a key Keynesian doctrine, to boost aggregate demand and economic output. According to Krugman, depression economics concerns identifying unemployed resources and putting them to good use as opposed to economic policy concerning consumer and investor confidence.
That is, the government should run deficits to stimulate the economy. This ambiguity is seen in the recommendations to regulate anything that requires rescuing in a financial crisis. Krugman challenges the dominant neoclassical paradigm's ability to predict the business cycle , but Rankin acknowledges a more constructive critique is required. Additionally, Krugman does not comment on the technical and financial limitations of policy implementation in a global financial market. Once an economy has recovered, Krugman advocates that preventative measures should be placed in the financial system, but implementing these reforms may be challenging when financial players are operating in their usual profit- maximising way.
Krugman suggests stimulating demand via increasing consumption, investment, and government expenditure, but does not explain how to fund an increase in income. An increase in government income can be funded by debt or tax , and although neither will more effectively stimulate the economy according to the Ricardian equivalence theorem, will each have differing socio-political and economic implications which Krugman does not explore.
Future consumer confidence may be negatively impacted when they see increased expenditure and cannot foresee an indefinite increase in income. Cochrane and Rankin have critiqued that market failures should not be fixed by typical Keynesian fiscal expenditure and exploitation of fiscal multipliers , instead suggesting monetary expansion and money printing. Unfreeze capital markets.
Fiscal spending on infrastructure development and directly financing non-financial sector. Global rescue orientated to developing countries. Regulation of financial markets to prevent future crisis . Irrational decision making and human behaviour is not limited to the consumer, but prevalent throughout government and financial institutions as well.
An argument opposing government manipulation of markets is when the free market causes less harm than the government. Krugman assumes inflation is a normal part of the free market and therefore in his book does not explain the causes of monetary inflation in Japan, South Korea, Indonesia, or Thailand.
The book presents a non-mathematical analysis of economics catered to a broad academic and non-academic audience, maintaining a precise historical and political account of economic crisis. Krugman does not differentiate between the types of actors, whether public or private, nor the different geographical scales in which they operate, and therefore offers little acknowledgement of the complex interdependent dynamics in a global financial environment. This is evident in the baby-sitting analogy where a sudden increase in demand ensues, but the origin of this demand is not explained.
Krugman argues that volatile speculative behaviour causes oscillations in confidence and subsequently repeated crisis of insufficient demand, with his policy recommendations specifically targeting demand failure s. However, Ritenour points out the age-old problem of finite resources and infinite demand.
This is termed, malinvestment. Ritenour proposes that recessions are caused by malinvestments when monetary policy, credit expansion and lower interest rates incentivises firms to invest too much in the production for preferred goods and not enough for less preferred goods.
- and Themselves. by Andrew Ross Sorkin, William Hughes, et al. In honor of our print magazine's ten-year look at the financial crash, we asked economists and authors to pick books: “Too Big to Fail. A new memoir by Paul Volcker with Christine Harper, Keeping At It: The Quest for Sound Money and Good Government, affords a glimpse at the.