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Loading... 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (edition 2010)by Simon Johnson, James Kwak
Work Information13 Bankers: The Wall Street Takeover and the Next Financial Meltdown by Simon Johnson
   LT picks: Blue Books (29) No current Talk conversations about this book.   ) btbell_lt | Aug 1, 2022 |  This book was written in 2010. Sadly little has changed.. LIsted below are some notes from the book... In the 1790s, Jefferson was particularly worried that the Bank of the United States could gain leverage over the federal government as its major creditor and payment agent, and could pick economic winners and losers through its decisions to grant or withhold credit. Hamilton believed that the government should ensure that sufficient credit was available to fund economic development and transform America into a prosperous, entrepreneurial country. The Panic of 1907, which nearly brought the financial system crashing down, clearly demonstrated the risks the American economy was running with a highly concentrated industrial sector, a lightly regulated financial sector, and no central bank to backstop the financial system in a crisis. But from 1980 until 2005, financial sector profits grew by 800 percent, adjusted for inflation, while nonfinancial sector profits grew by only 250 percent. The government bailout of the S&L industry cost more than $100 billion, and hundreds of people were convicted of fraud. This was the first example of what came to be known as the “Greenspan put”—the idea that if trouble occurred in the markets, the Fed would come to their rescue. Greenspan cut interest rates sharply in 1998 following the Russian crisis and in 2001 following the collapse of the Internet bubble, each time helping to cushion the impact of the downturn and arguably pumping up the next bubble. The fourth money machine of modern finance—after high-yield debt, securitization, and arbitrage trading—was the modern derivatives market. As a result, in 2004–2006, as subprime lending reached its peak in both volume and innovation, Fannie and Freddie were pushed out of large parts of the market, because the loans being made violated their underwriting standards and because the Wall Street banks were so eager to get their hands on those loans. With low interest rates, banks could raise money from depositors virtually for free; they could borrow cheaply from each other; they could borrow cheaply at the Fed’s discount window; they could sell bonds at low interest rates because of FDIC debt guarantees; they could swap their asset-backed securities for cash with the Fed; they could sell their mortgages to Fannie and Freddie, which could in turn sell debt to the Fed; and on and on. They did not take harsh measures to shut down or clean up sick banks. They did not cut major financial institutions off from the public dole. They did not touch the channels of political influence that the banks had used so adeptly to secure decades of deregulatory policies. They did not force out a single CEO of a major commercial or investment bank, despite the fact that most of them were deeply implicated in the misjudgments that nearly brought them to catastrophe. This is how capitalism is supposed to work. Failure should be punished, not rewarded. The government should be the backstop protecting society against a financial collapse, but it should exact a price for that protection. The end of “too big to fail” will reduce large banks’ funding advantage, forcing them to compete on the basis of products, price, and service rather than implicit government subsidies. ( ) writemoves | Oct 26, 2021 | Review 11.30.17 - I was very interested in the financial meltdown as I work in the finance industry. It was a rough time. (  ) Chica3000 | Dec 11, 2020 | LOM-Lausanne | Mar 19, 2020 |  ) M_Clark | Apr 25, 2016 |
Though this blistering book identifies many causes of the recent financial crisis, from housing policy to minimum capital requirements for banks, the authors lay ultimate blame on a dominant deregulatory ideology and Wall Street's corresponding political influence. Johnson, professor at the MIT Sloan School of Management, and Kwak, a former consultant for McKinsey, follow American finance's rocky road from the debate between Jefferson and Hamilton over the first Bank of the United States through frequent friction between Big Finance and democracy to the Obama administration's responses to the crises. The authors take a highly critical stance toward recent palliative measures, arguing that nationalization of the banks would have been preferable to the bailouts, which have allowed the banks to further consolidate power and resources. Given the swelling size of the six megabanks, the authors make a persuasive case that the financial system cannot be secure until those banks that are too big to fail are somehow broken up. This intelligent, nuanced book might be too technical for general-interest readers, but it synthesizes a significant amount of research while advancing a coherent and compelling point of view. (Apr.) Copyright © Reed Business Information, a division of Reed Elsevier Inc. All rights reserved. Distinctions
Johnson and Kwak examine not only how Wall Street's ideology, wealth, and political power among policy makers in Washington led to the financial debacle of 2008, but also what the lessons learned portend for the future. No library descriptions found. |
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 Google Books — Loading...GenresMelvil Decimal System (DDC)332.10973Social sciences Economics Finance Banking Biography And History North America United StatesLC ClassificationRatingAverage: (3.87)
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