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After the Fall: Saving Capitalism from Wall Street and Washington Hardcover – November 24, 2009


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Product Details

  • Hardcover: 250 pages
  • Publisher: Encounter Books; First Edition edition (November 24, 2009)
  • Language: English
  • ISBN-10: 1594032610
  • ISBN-13: 978-1594032615
  • Product Dimensions: 6.4 x 0.8 x 9.4 inches
  • Shipping Weight: 1.1 pounds (View shipping rates and policies)
  • Average Customer Review: 4.6 out of 5 stars  See all reviews (23 customer reviews)
  • Amazon Best Sellers Rank: #997,741 in Books (See Top 100 in Books)

Editorial Reviews

Review


“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 pieces—and 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 how—if we have the political will—we 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.

More About the Author

Nicole Gelinas, a Chartered Financial Analyst (CFA) charterholder, is a Manhattan Institute senior fellow and contributing editor to City Journal. She lives in New York City.

Customer Reviews

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If the subject matter weren't so depressing and infuriating, I would even say that the book was fun to read.
J. Seidman
This book goes beyond that, describing how each step in the dance between the financial institutions and the government led to the present situation.
J. Myers
The author does an outstanding job of logically presenting her factual material, yet doing so in a very easy to read fashion.
Layman Follower

Most Helpful Customer Reviews

101 of 101 people found the following review helpful By Michael T Kennedy VINE VOICE on November 9, 2009
Format: Hardcover Verified Purchase
First, I am not a financial analyst or even a very sophisticated investor. I just wanted to know what happened and, after reading this book, I think I know. Ms Gelinas is a financial analyst and seems to have spent quite a bit of time thinking about what happened and how we might start to put things back together. It began with the changes in banking in the 1980s, largely I believe (although she does not say so) due to inflation. For decades, the savings and loan had a business model of borrowing from savers at four percent interest and lending to homeowners at six percent interest. All that changed when inflation drove those savers, including me, to look for higher returns to compensate for the loss of value from inflation. Most of the evil that followed, in my opinion not hers, can be traced to this phenomenon. Now that I have demonstrated how naive I am, let's consider her book.

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.
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46 of 46 people found the following review helpful By R. Pollard on November 22, 2009
Format: Hardcover Verified Purchase
There are dozens of books analyzing the recent financial meltdown and prescribing measures to guarantee that it never happens again. But this one is special. In less than 200 pages, Gelinas gets to the core of the problem - the government adoption of "too big to fail" and the consequent weakening of market discipline. In the final chapter she discusses measures that could prevent or ameliorate future crises, but doesn't offer much hope they will be adopted. Even when discussing complex financial instruments or accounting, her writing is concise and as jargon-free as possible.
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.
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20 of 21 people found the following review helpful By J. Seidman on May 7, 2010
Format: Hardcover
I have to say that this book was very different from what I expected based on the description. The bulk of the book consists of an insightful look at how we got into the current mess. Starting with the measures instituted during the Great Depression, Gelinas walks us through the steps that brought us to the financial crisis.

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.
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10 of 10 people found the following review helpful By Layman Follower on March 3, 2010
Format: Hardcover Verified Purchase
I am both an experienced investor and a retired former CEO of a fortune 100 company. Having read many books on this subject, I have found none to be more objectively informative than is this one.

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.
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15 of 18 people found the following review helpful By Michael Emmett Brady on December 25, 2009
Format: Hardcover
The author has done an excellent job in demonstrating that the privatization and deregulation of financial markets, begun in 1979 by Jimmy Carter and continued by all American Presidents and their administrations since, was a grave mistake and blunder that rivals the same type of mistake made by Japan in 1986 .This mistake was compounded by the commercial and investment bankers reliance on VAR(Value at Risk)models based on the false claims (Benoit Mandelbrot proved these claims false in 1963) that all financial markets' time series data was normally distributed(log normally distributed).Applications of VAR in the financial industry were supposed to be superior replacements for the various financial regulations which were being eliminated. The soundness and applicability of VAR was supposed to allow the financial markets to engage in levels of securitization and speculation of the same kind as occurred in the middle to late 1920's while supposedly preventing any possiblity of a major economic collapse . These models were the direct result of applying the Efficient Market Hypothesis(EMH)as developed by a number of libertarian economists, associated primarily with the University of Chicago's department of economics and Business School,such as Milton Friedman,George Stigler,Robert Lucas,Gary Becker,Eugene Fama,Merton,Miller,and Markowitz. Many others were associated with the rational expectationist and real business cycle schools of thought.These schools basically emphasized the Subjective Expected Utility(SEU) theory that claimed that there was no such thing as a separate type of decision making done under conditions of uncertainty,ambiguity, or ignorance.Read more ›
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