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Capital Offense: How Washington's Wise Men Turned America's Future Over to Wall Streetby Michael Hirsh
Synopses & Reviews
For the last thirty years, it has been the mantra of Washington, Wall Street, and economic academia: The fastest way to economic growth is to make financial markets happy. The few economists and government watchdogs who took exception to this theory or pointed out some of the dangerous trends that accompanied it were either castigated, dismissed as cranks, or ignored. How could this happen? How could five successive presidents from both parties pursue and expand an economic policy that hollowed out the American economy and produced the worst economic catastrophe since 1929?
In Capital Offense, Newsweek's Michael Hirsh takes you inside the lives of the key people who gave us this era of free-market finance, beginning with its creator and earliest promoter, economist Milton Friedman, and its adoption by the conservative movement. He explores Friedman's vast influence on the Reagan administration, where his theories first became government policy (known as Reaganomics and Supply Side economics), and follows its continuation through the first and second Bush administrations, with the Clinton era sandwiched in between. In addition, he explains why this disaster-inducing ideology is still alive and well under President Barack Obama.
Hirsh takes you inside high-level, closed-door conversations of top White House advisors and administration officials such as Alan Greenspan, Robert Rubin, Paul O'Neill, and others. He illuminates key figures and lively interpersonal clashes, including the fierce and ongoing conflict between Larry Summers and Nobel Prize–winning economist Joe Stiglitz, a staunch opponent of free-market theory. He also offers crucial insights on why President Obama took so long to work on the economy—and why his policies, while far better than nothing, may not be nearly enough to sustain a long-term recovery.
This solidly researched and skillfully reported exposé catalogs the missteps of three decades of fiscal, regulatory, and financial recklessness, including the dismantling of the Glass-Steagall Act, the S&L debacle, Enron, and the subprime mortgage meltdown. It also explains why the Clinton administration failed to heed the warning sounded by the Asian financial crisis of 1998 and why then Treasury Secretary Rubin dismissed a very explicit warning about the dangers of a new type of financial instrument known as derivatives.
As we struggle to emerge from the financial crisis, Wall Street's continued dominance of the global economy remains a significant barrier to recovery, and America's reemergence as a major manufacturing and industrial power seems ever more unlikely. Capital Offense combines a clear and insightful account of how we reached this point with thoughtful suggestions of what can be done to change course.
"There's plenty of blame to spread around for the Great Recession: Wall Street, government regulators, mortgage lenders, and sub-prime borrowers have all, at various times, been held responsible. In Michael Hirsh's view, however, the real culprits are the free-marketeers - economic theorists such as Milton Friedman and Treasury chairmen Alan Greenspan and Ben Bernanke - who placed excessive faith in the self-correcting powers of unfettered markets and failed to anticipate the imminent crisis. Hirsh's understanding of the philosophical and political origins of the credit crunch is considerably broader and deeper than those of most reporters, who merely recount Wall Street's recent failures. Still, it's difficult to directly tie economists and politicians to the mortgage bubble. Milton Friedman's free market principles may have led Ronald Reagan to repeal Glass-Steagall provisions, fomenting the crisis, but regulation alone wasn't responsible for unscrupulous and irresponsible lending or exponential growth in the derivatives market. Still, Hirsh's perspective is valuable, and he acknowledges nuances frequently ignored by others, such as the gender of Washington's derivatives regulator, Brooksley Born, a rare woman among men and thus a 'lightweight' to be ignored by swaggering Wall Street veterans like Robert Rubin and Lawrence Summers, who regarded her cautionary pleas for regulation as a failure of machismo.
(c) Copyright PWxyz, LLC. All rights reserved." Publishers Weekly (Copyright PWyxz LLC)
Veteran "Newsweek" reporter Hirsh gives a colorful narrative history of the era he calls the Age of Capital, telling the story through the eyes of its key players, from Ronald Reagan and Milton Friedman through Larry Summers and Timothy Geithner.
Advance Praise for Capital Offense
"To understand the slow, steady shift of power from Washington to Wall Street, you have to connect the dots year by year, across decades. For that you need a seasoned veteran like Mike Hirsh, who has used deep sourcing, a long memory, and his razor-sharp critical sensibilities to show how the tide slowly turned from public good to private gain. In this amazing book, Hirsh shows definitively how Wall Street won and America lost."
—Ron Suskind, author of The Way of the World
"In this brilliantly crafted narrative, Hirsh pins the financial crisis on the hubris of key economic policymakers in Washington who, through a mix of training, background, and philosophy, allowed themselves to be persuaded that the less regulation of Wall Street, the better. Balanced? Not necessarily. Fascinating? Definitely."
—Kenneth Rogoff, coauthor of This Time Is Different
"In this riveting narrative, Michael Hirsh shows how the road to the Great Recession of 2008–2010 was paved with mistaken assumptions, sleepy regulators, hubris, misplaced faith in markets—and that we may be headed down the same road again. Hirsh is masterful at weaving economics, politics, and personalities into a great story that illuminates how we got here and how we must act to avoid the next crisis."
—Steve Weisman, author of The Great Tax Wars
"A vivid, insider account of how elite policymakers became intellectual hostages to free market fundamentalism and set about giving Wall Street the keys to the global economy. Michael Hirsh draws on firsthand knowledge of Washington's elite to describe the ideological and personality struggles that gave 'free market' fundamentalism a Stalinist stranglehold over policy. A deft account of how men who should have known better wrecked the economy."
—Yves Smith, author of ECONned
"This is a fascinating inside account of the political dynamics and personalities of the crew who wrecked the economy. Remarkably, as Capital Offense points out, the same group is still calling the shots today, which makes people very concerned."
—Dean Baker, author of False Profits
Why every president from Reagan through Obama has put Wall Street before Main Street
Over the last few decades, Washington’s firmly held belief that if you make investors happy, a booming economy will follow has caused an economic crisis in Asia, hardship in Latin America, and now a severe recession in America and Europe. How did the best and brightest of our time allow this to happen? Why have these disasters done nothing to change the free-market mantra of the Washington faithful? The answer has nothing to do with lobbyists and everything to do with ideology. In Capital Offense, veteran Newsweek reporter Michael Hirsh gives us a colorful narrative history of the era he calls the Age of Capital, telling the story through the eyes of its key players, from Ronald Reagan and Milton Friedman through Larry Summers and Timothy Geithner.
• Based on the solid research and skilled reporting of Newsweek Senior Editor Michael Hirsh
• Takes you inside high-level, closed-door conversations of top White House advisers and administration officials such as Alan Greenspan, Robert Rubin, Paul O’Neill, and others
• Illuminates key figures and lively interpersonal clashes, including the conflict between Larry Summers and Nobel Prize-winning economist Joe Stiglitz
• Offers crucial insights on why President Obama took so long to work on the economy—and why he may not be going far enough
• Catalogs the missteps of three decades of fiscal, regulatory, and financial recklessness, including the dismantling of the Glass-Steagall Act, the S&L debacle, Enron, and the subprime mortgage meltdown
As we struggle to emerge from the financial crisis, one thing seems certain: Wall Street’s continued dominance of the global economy. Propelled into the lead by a generation of Washington policy-makers, Wall Street will continue to stay ahead of them.
About the Author
MICHAEL HIRSH is Newsweek's National Economics Correspondent. He has covered international affairs for more than two decades, from several continents, and now writes an online column entitled "The World from Washington." His 2003 cover story, "Bush's $87 Billion Mess," was one of three that earned Newsweek the 2004 National Magazine Award for General Excellence.
Table of Contents
Prologue: The Hippopotamus Under the Rug.
1 The Most Certain Man in the World.
3 The Stealth Idealogue.
4 The Rise of Rubinomics.
5 Larry and Joe.
6 Portrait of a Contrarian.
7 Children of the Boom.
8 The High Tide of Hubris.
9 The Last Guy at the Alamo.
10 Reaganites Redux.
11 The Canary in the Mine.
12 The King of the Street.
13 Last Gathering of the Faithful.
14 Blown Away.
15 Geithner Cleans Up (with Bernanke at His Back).
16 Too Big to Jail.
17 Larry and Joe (Again).
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