Good and True History is important so that past mistakes are not repeated – or false excuses for what was done are exposed for frauds and appropriate parties discredited if not prosecuted. Nowhere is good history more important than in the case of the just past financial meltdown of 2007-2009. Hopefully it does not linger or outbreak with greater virulence in 2010 to 2012 though commercial real estate and government finance in the US and Europe, housing bubbles in China and India, and increasing natural disasters like earthquakes, fires, and flooding continue to put recovery at risk.
So with that in mind here are 6 recommendations on what happened and who-dunnit in the Great Financial Meltdown:
Paul Krugman – NYTimes blog – The Irish Mirror. Small piece casts light on how the mortgage flu bug afflicted Ireland even though the Irish did not have some of the key US symptoms.
Andrew Sorkin – 539 page book – Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves. The book’s title says it all and even as a reporter at the NYTimes, the access to key players and events is astonishing. Good chronology, but low analysis.
Reinhart and Rogoff – 420 page book – This Time is Different: Eight Centuries of Financial Folly – provides the raw data and analysis missing in Niall Ferguson’s The Ascent of Money. Also shows how remarkably similar the basic ruinous financial bubbles are.
John Cassidy – 400 page book – How Markets Fail : The Logic of Economic Calamities– is a step above the Justin Fox book on the Myth of Rational Markets because it has a broader viewpoint on the economic factors shaping markets – not just financial markets.
Bailout Nation – 400 page book – Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy documents in clear terms some of the key political and economic trends that produced the Financial Meltdown.
Charles Morris -260 page book – The Two Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash describes easy money, high rollers and how they produced the great credit crash. But even better, the book came out before Bears Stearns collapse and then Lehman Brothers followed by $700Billion and counting bailout. In effect, US had an early warning much like the ignored signals at Pearl Harbor or “unconnectable dots of ” 9/11.
The key point in all these books is that a)financial markets simply were not even close to working perfectly and efficiently as the Chicago School described and counted on so that the next stopper, b)finanacial regulators and statutory controls, which had been largely disarmed/disbanded, were not available to effectively control the excesses which generated the bubble and ensuing collapse and c)the top banksters were only too happy to take advantage of Taxpayer financed Moral Hazard Insurance because through a series of incidents from Resolution Trust, the CMO bailouts to Long Capital Management, through 3 Greenspan lowering of interest rates in the 2000’s – they had seen the Federal Reserve act to preserve US Financial markets – and not let the markets be “efficient and clearing” by themselves.
So now as basic Financial Reform is delayed and is being stewed and depleted by very powerful financial lobbies, the question of how soon and how long the US and World economies get to be immunized against a repeat virulent financial bubble is still in the air.