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After the Fall: Saving Capitalism from Wall Street-and Washington Paperback – April 19, 2011
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When it comes to our flawed financial system, most writers generally lob big bombs and hope for, at best, maximum splatter. Nicole Gelinas by contrast sends a precision missile that neatly and elegantly takes the thing to piecesand lays the ground for a better structure. Hail Gelinas.”
&mdash Amity Shlaes, Senior Fellow, Council on Foreign Relations and author of The Forgotten Man: A New History of the Great Depression
A powerful analysis of how the too-big-to fail policy has undermined public trust in markets.”
&mdash Luigi Zingales, Robert C. McCormack Professor of Entrepreneurship and Finance, University of Chicago-Booth School of Business and author of Saving Capitalism from the Capitalists
Nicole Gelinas has done the country a great favor by explaining concisely and cogently the origins of the financial crisis of 2008 and howif we have the political willwe can avoid a repeat in the future. After the Fall is an instant classic that should be required reading in both Washington, D.C. and Wall Street.”
&mdash John Steele Gordon, author of An Empire of Wealth: The Epic History of American Economic Power
Nicole Gelinas has written a fine book about the long prehistory of financial catastrophes that culminated in the extraordinary collapse of the banking industry in September of 2008. The book is lucid and sober, simple but not simplistic, and essential background to understanding the inherent vulnerabilities of modern finance.”
&mdash Richard A. Posner, U.S. Circuit Judge and author of A Failure of Capitalism: The Crisis of 08 and the Descent into Depression
From the Inside Flap
Robust financial markets support capitalism, they don't imperil it. But in 2008, Washington policymakers were compelled to replace private risk-takers in the financial system with government capital so that money and credit flows wouldn't stop, precipitating a depression.
Washington's actions weren't the start of government distortions in the financial industry, Nicole Gelinas writes, but the natural result of 25 years' worth of such distortions.
In the early eighties, modern finance began to escape reasonable regulations, including the most important regulation of all, that of the marketplace. The government gradually adopted a "too big to fail" policy for the largest or most complex financial companies, saving lenders to failing firms from losses. As a result, these companies became impervious to the vital market discipline that the threat of loss provides.
Adding to the problem, Wall Street created financial instruments that escaped other reasonable limits, including gentle constraints on speculative borrowing and requirements for the disclosure of important facts.
The financial industry eventually posed an untenable risk to the economy -- a risk that culminated in the trillions of dollars' worth of government bailouts and guarantees that Washington scrambled starting in late 2008.
Even as banks and markets seem to heal, lenders to financial companies continue to understand that the government would protect them in the future if necessary. This implicit guarantee harms economic growth, because it forces good companies to compete against bad.
History and recent events make clear what Washington must do.
First, policymakers must reintroduce market discipline to the financial world. They can do so by re-creating a credible, consistent way in which big financial companies can fail, with lenders taking their warranted losses. Second, policymakers can reapply prudent financial regulations so that markets, and the economy, can better withstand inevitable excesses of optimism and pessimism. Sensible regulations have worked well in the past and can work well again.
As Gelinas explains in this richly detailed book, adequate regulation of financial firms and markets is a prerequisite for free-market capitalism -- not a barrier to it.
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She describes the history of the crash in 1929 as a consequence of irrational exuberance and unregulated financial manipulation during the 1920s. She describes, for example, the fall of Sam Insull who built Commonwealth Edison into a modern utility but lost track of all the financing until, in the wake of 1929, it collapsed and took thousands of savers' investments with it. She compares Insull to Enron, a valid comparison, I think. She describes the regulatory steps that were taken by Roosevelt's administration and how it stabilized the financial world for 70 years.
The story of the 2008 collapse begins in 1984 with the rescue of the Continental Illinois Bank. Here began the "too big to fail" story. Two things happened here that led to the crisis. One was the decision to bail out all depositors, including those whose deposits exceeded the FDIC maximum.Read more ›
If you have only limited understanding of financial markets, this book is a great introduction to recent events. But even financial professionals will benefit from the insight and perspective she brings.
Reading about bailouts and regulatory policy is usually pretty dry stuff. Fortunately, Gelinas has an writing style that makes it incredibly easy to absorb the information. If the subject matter weren't so depressing and infuriating, I would even say that the book was fun to read. Gelinas manages this without oversimplifying anything or glossing over the non-intuitive points.
After completing this background lesson, she provides her recommendations on how to fix the system. I tend towards the libertarian when it comes to regulation, so I expected to disagree with most of what she said. I was surprised to find that, with only a very few exceptions, her suggested remedies sounded effective, prudent, and well-considered. While this section of the book was comparatively small, it was as big as it needed to be; the analysis and history presented earlier lays such firm groundwork that she doesn't need much more argument to be convincing.
Even if you're reading this after a financial reform bill makes it through Congress, I'd still highly recommend this book. It's well worth it to learn what went wrong in our financial sector, and Gelinas's book is the best I've seen on the topic.
The author does an outstanding job of logically presenting her factual material, yet doing so in a very easy to read fashion. One does not have to have any experience in the economic or investment field to enjoy and learn from this book. It is very friendly to read, yet involving to the point that you will not want to put it down.
I highly recommend it.
Most Recent Customer Reviews
Being able to write about how and why economies fail and recover amazes a simple minded reader like me. Read morePublished 13 months ago by phil carlin
Author does a good job describing the evolution of the American banking system along with providing suggestions to reduce risks for systemic failures in the future.Published 18 months ago by Wheeler Mike
Nicole Gelinas of the uber-conservative Manhattan Institute has written an interesting book on the financial crisis and what she perceives to be its causes. Read morePublished on March 22, 2013 by simon matthew
I believe this book gave an accurate acount of the fall of Wall Street. I would recommend this book to other persons.Published on February 24, 2013 by Bartholomew Jones
This book started off with a statement that did not mince words: "The credit crisis and the resulting recession are the work of an invisible hand - not the invisible hand of free... Read morePublished on August 8, 2012 by Glenn Corey
Author Gelinas presents a very interesting and credible accounting of the 'Great Recession' that focuses on the government's role via 'Too Big to Fail. Read morePublished on January 9, 2012 by Loyd Eskildson
I saw Nicole Gelinas speak on her book and had a little trouble following as she tried to explain the concepts in 15 minutes. Read morePublished on June 20, 2010 by D. Moore
For several years I have been struggling to understand the causes of the financial meltdown and what we can do now. It has been an uphill journey. This book is wonderful. Read morePublished on June 1, 2010 by J. Myers