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13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (Vintage)by Simon Johnson
Synopses & Reviews
Even after the ruinous financial crisis of 2008, America is still beset by the depredations of an oligarchy that is now bigger, more profitable, and more resistant to regulation than ever. Anchored by six megabanks—Bank of America, JPMorgan Chase, Citigroup, Wells Fargo, Goldman Sachs, and Morgan Stanley—which together control assets amounting, astonishingly, to more than 60 percent of the country’s gross domestic product, these financial institutions (now more emphatically “too big to fail”) continue to hold the global economy hostage, threatening yet another financial meltdown with their excessive risk-taking and toxic “business as usual” practices. How did this come to be—and what is to be done? These are the central concerns of 13 Bankers, a brilliant, historically informed account of our troubled political economy.
In 13 Bankers, Simon Johnson—one of the most prominent and frequently cited economists in America (former chief economist of the International Monetary Fund, Professor of Entrepreneurship at MIT, and author of the controversial “The Quiet Coup” in The Atlantic)—and James Kwak give a wide-ranging, meticulous, and bracing account of recent U.S. financial history within the context of previous showdowns between American democracy and Big Finance: from Thomas Jefferson to Andrew Jackson, from Theodore Roosevelt to Franklin Delano Roosevelt. They convincingly show why our future is imperiled by the ideology of finance (finance is good, unregulated finance is better, unfettered finance run amok is best) and by Wall Street’s political control of government policy pertaining to it.
As the authors insist, the choice that America faces is stark: whether Washington will accede to the vested interests of an unbridled financial sector that runs up profits in good years and dumps its losses on taxpayers in lean years, or reform through stringent regulation the banking system as first and foremost an engine of economic growth. To restore health and balance to our economy, Johnson and Kwak make a radical yet feasible and focused proposal: reconfigure the megabanks to be “small enough to fail.”
Lucid, authoritative, crucial for its timeliness, 13 Bankers is certain to be one of the most discussed and debated books of 2010.
From the Hardcover edition.
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.
Taking risks is a valid part of the business banks do, but Claire Hill and Richard Painter, both prominent experts on banking law and behavior, point out that its not really clear where the line is between appropriate and irresponsible. Starting with an expertly curated collection of the most poignant examples of bankers gone wild, Restoring Responsibility in Banking presents an accessible history of banking in the past few decades and shows exactly how banks became such risk-takers—and how they started creating and investing in dangerously complex securities. Hill and Painter then delve into banker behavior, going beyond just a simple pursuit of money, and look into the culture, need for status, and other factors that contribute to how success is defined in banking. They show how the most effective solution is for banks to give individual employees more personal liability for the risks taken by the bank as a whole, and they step back and say that, actually, greed is not good, and theres no reason the entire culture of an industry should ride on it. Restoring Responsibility in Banking is a refreshing yet authoritative call for banks to return to the idea that theirs is a noble profession that serves society as well as themselves.
In spite of its key role in creating the ruinous financial crisis of 2008, the American banking industry has grown bigger, more profitable, and more resistant to regulation than ever. Anchored by six megabanks whose assets amount to more than 60 percent of the country’s gross domestic product, this oligarchy proved it could first hold the global economy hostage and then use its political muscle to fight off meaningful reform. 13 Bankers brilliantly charts the rise to power of the financial sector and forcefully argues that we must break up the big banks if we want to avoid future financial catastrophes.
Updated, with new analysis of the government’s recent attempt to reform the banking industry, this is a timely and expert account of our troubled political economy.
About the Author
Simon Johnson is Ronald A. Kurtz Professor of Entrepreneurship at MIT’s Sloan School of Management and a senior fellow of the Peterson Institute for International Economics. He is coauthor, with James Kwak, of The Baseline Scenario, a leading economic blog, described by Paul Krugman as “a must-read” and by Bill Moyers as “one of the most informative news sites in the blogosphere.”
James Kwak has had a successful business career as a consultant for McKinsey & Company and as a software entrepreneur. He is currently a student at the Yale Law School.
Visit the authors' blog at baselinescenario.com.
Table of Contents
Part I: The Problem
1 Irresponsible Banking
2 How Banking Became What It Is Today
3 Explaining Banker Behavior
Part II: Solutions
4 Law and Its Limits
5 Covenant Banking
6 Responsible Banking
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