Customer Reviews: Dumb Money: How Our Greatest Financial Minds Bankrupted the Nation
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on March 6, 2009
Mr. Gross has given us a clear, non-technical account of our current financial crisis, credit lockdown and recession. It makes for lively reading as well, since many of the key players of this account are allowed to characterize themselves in their own words (quoted mostly in context). Mr. Gross falls just short of self-righteous indignation by reminding himself and us of the parts we played in enabling the players. There are enough facts and figures to refute the idea that somehow the people who did not make money were to blame for the excesses into which the money-makers were enticed. I do have two complaints about the story. First, there is a lack of discussion of the involvement of international credit markets connected with international trade - what I believe were the "canary in the mineshaft" - that dragged down central banks once counterparty trust was lost. Secondly, I accuse Mr. Gross of copping out in his concluding chapter. Following such a story of legal, ethical, and moral drama, I would expect the author to give us an account of the lessons he learned, and lessons we might carry away. However, he was gun-shy, and said as much, about making "predictions" about future events. The reader will have to write his or her own conclusions. For me, it was the old virtues of honesty, thriftiness and hard work. You cannot write a credit default swap on those. Other people will have other lessons.
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on May 25, 2009
Gross has managed to write one of the most clearly stated, precise and condensed versions of the origins and nature of the current economic crisis currently on the market.

Gross is not interested in finding a ideologically motivated one-stop-shopping-style guilty party ("It's Clinton's fault!"). Instead, he concentrates on the mechanics of how things got to the point they are at now - and in a way easily accessible to the layperson, without sacrificing accuracy.
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HALL OF FAMEon November 16, 2009
Recently I read a Newsweek column by Daniel Gross documenting that U.S. private employment today is less than in 2000, despite population having grown 9%. That bit of basic insight led me to read his "Dumb Money" about how the Ownership Society quickly degenerated into the Bailout Nation during the same time period. The book is short (101 paperback-sized pages), interesting (even entertaining), yet comprehensive, covering all the decade's financial 'stars' - Ben Bernanke - keeping interest rates low, continuing Greenspan's rosy forecasts), Christopher Cox (ineffectual SEC head), Alan Greenspan (keeping interest rates too low for too long, lobbying for deregulation, blindly following philosopher Ayn Rand instead of economic data and theorists), Edward Lambert (acquired K-Mart and Sears early in the decade, then spent $4.9 billion to buy back shares at an average $118 - now $70), Richard Fuld (named a #1 CEO by Institutional Investor magazine in 2006, received a $22 million bonus in 2007, and then watched the 28,000+ firm Lehman Brothers collapse in a market-terrorizing bankruptcy in 2008), Angelo Mozilo (making mortgages available to almost everyone in his pursuit of #1 market share), Henry Paulson (a latecomer to the crisis, he then created a bailout for the institutions that created the crisis), Robert Rubin (lobbyist for deregulation, Citibank board member while sailed into a major government rescue), John Thain (CEO NYSE from 2004-2007, paid $83,785,021 in 2007 - mostly by his not-yet employer Merrill Lynch, requested a $10 million 2008 bonus for 'saving' Merrill by selling it to Bank of America for $28 billion + $20 billion in government money, spent $1.22 million in 2008 corporate funds to renovate two conference rooms, a reception area, and his office, and was fired in January, 2009), the fine folks (both legislators and regulators) behind the Community Reinvestment Act, and countless financial geniuses that bought up every exotic three-letter financial instrument, company M&A or LBO, and mirage within sight.

Gross even managed to 'share the blame' (sarcastically) with China for our low interest rate-fueled housing bubble. Institutional players involved and included in Gross' accounting included insurance giant AIG, banks, bond rating agencies, builders, Congress (bought, paid-for, and asleep), Fannie-Mae and Freddie-Mac (repeatedly raised their loan limits, allowing the bubble to keep inflating), mortgage originators, and the shadow bankers. Dumb money players were not limited to the private sector - California and the U.S. government also were major participants, followed by New York, New Jersey, Illinois, etc. - all but North Dakota, Wyoming, Montana and Alaska. And none of this could have happened without the little people (you and I) who bought ARMs, balloons, HELOCs, liar's loans, and no-down loans by the millions and then got stuck with them after the crash; regardless, we're all paying now for the private and public sector bailouts, along with our children, grandchildren, great-grandchildren, etc.

Gross' Recommendations? Outlaw stupidity, and create some sort of fiscal lithium (sprayed over Wall Street?) for starters. Gross is not enthusiastic about more regulation (too easy to get around). Perhaps a tax on securities trading and the creation of structured financial products to be used to help cover future messes.
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on November 22, 2009
This is a very basic explanation of what caused the collapse of the financial system. Basic. The intent was not to provide all the financial rationale or details of what happened. The intent is to give a broad based overview of what caused the collapse. To completely understand it all in detail you would have to first be very experienced in this field and/or very financially literate (which most are not), and you would need to read tome after tome on the subject. But, if you have said, "Could someone just explain what happened?" then this is the book for you. It's not a class on economics or an in depth analysis of the psychology behind it all, or a textbook with citations and footnotes. This guy is just trying to explain to you "what happened." I believe that was his goal and I believe he achieved it successfully.
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on February 7, 2010
Hindsight is always 20-20 and everything is always so obvious after the fact. Daniel Gross offers a concise view at the mechanics of the financial meltdown, which points out the root problems, how they developed, and the mania that ensued. Refreshingly, the author does not carry any political biases and instead focuses on the facts. If you're looking for a short and approachable summary of the meltdown, then this is it.

On the other hand, what makes this book so good as a summary, is also its weakness in the broader context of financial & market policy moving forward - I would be careful about drawing generalized conclusions based on the analysis.
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on January 21, 2012
This book is a really great starting place to begin to understand the financial cataclysm of 2008 that was so large that there don't even exist adjectives to span its enormity - words like "colossal", "monumental", "humongous", all seem too small or ordinary for this extraordinary financial castasrophe. Everyone should try to understand an event of this magnitude and for those like myself who are not finance professionals, this short (101 pages of surprisingly readable text) is a great place to start. Gross informs us at the outset that he set out to try to understand why "it suddenly became acceptable for the United States to start guzzling debt the way fraternity boys pound beers on spring break" and he mostly succeeds.

It's all here: the steady loss of our manufacturing base to China, the rise of "cheap money" (loans at temptingly low interest rates), "securitization" (the packaging of high and low risk mortgage debt into "mortgage-backed securities"), Enron and Worldcom, the epidemic of sub-prime, risky home loans, the wanton use of debt as "leverage" to finance more and more absurd take-overs, soaring government debt levels fueled by the low cost of borrowing, and the addictive need for constantly rising values in all asset classes to prevent total collapse of over-leveraged hedge funds, private equity groups, and investment banks. Large investment banks inexplicably thought they could carry 30 dollars in debt for every dollar of capital. Sub-prime lenders offered no-down-payment home loans to borrowers with undocumentable income. Government regulators obligingly eased requirements for reserves in order to keep the party going.

Faced with stagnating wages, average workers borrowed their way into affluence through refinancing mortgages and running up credit card balances until they could not longer safely get off the treadmill. Hungry for profits, the rest of the world joined in the frenzy and got burned as well. Gross gives the sense that the lethal overdose of borrowing was a juggernaut that no one individual or institution could control. In his somewhat underwhelming concluding chapter, Gross seems to think that the world financial crisis of 2008 is neither the first nor the last of an inevitable series of bubbles that inhere in free markets. He anticlimactically recommends we be "smarter" and more restrained in our investment choices.

I learned many interesting specifics about the financial crisis of 2008, and overall, that it really was what most of us suspected it was: a lethal admixture of greed, narcissism, diabolical ingenuity, and lemming-like, imitative behavior on a grand scale. This is a great, painless introduction to a disturbing, complicated, important tale of capitalism gone wild.
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on July 16, 2015
If you know about the Financial Crisis, this book tells it pretty straight forward. If you don't know the meaning of dumb money, Daniel Gross tells it pretty clear for you. It's a short read, and good, too. You can probably finish it in a day.
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on January 20, 2012
This is a small book, and relatively easy reading (in a physical sense). Somewhat disturbing in an intellectual sense, but of course that's part of its purpose. It is explanatory rather than casting aspersions, though the author makes clear that there is plenty of fault to go around. It is a book that ought to be read -- studied, even -- by anyone interested in understanding how the richest nation in the history of the world could come to the edge of fiscal collapse in what seemed like (but wasn't) a matter of weeks or even days.
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TOP 100 REVIEWERon February 10, 2014
Daniel Gross (born 1967) is an American journalist who is editor of global finance for the Daily Beast/Newsweek, and was formerly Senior Editor at Newsweek. He has written/cowritten other books such as Forbes Greatest Business Stories of All Time,Pop!: Why Bubbles Are Great For The Economy,Better, Stronger, Faster: The Myth of American Decline . . . and the Rise of a New Economy,Bull Run: Wall Street, the Democrats, and the New Politics of Personal Finance, etc.

He wrote in the first chapter of this 2009 book, "How did the Ownership Society devolve so quickly into Bailout Nation? What turned the Bush Boom---a period of low interest rates, rising asset prices, and economic growth---into Hoover 2.0? How did the crown jewel of American capitalism---our financial services industry---transform into cubic zirconium? What happened? This brief book---a long essay that is more of a chronicle of this decade's money culture than an investigation into the fetid nooks and crannies of the financial system---attempts to answer these questions." (Pg. 4-5)

He observes, "The Era of Cheap Money presented Wall Street with a new set of products it could mine, process, package, sell, and trade. Pursuing its own self-interest, Wall Street would use securitization to turn ultracheap money into cheap money for the masses. And the financial sector would start to use derivatives to insure other securities. In the process, Wall Street helped create and stimulate the Cheap Money businesses that would prosper and drive America's impressive post-9/11 recovery." (Pg. 22)

He states, "Alas, in the Era of Dumb Money, daydream believers who thought their houses were functioning as asset accumulation accounts woke up each morning to find their faith rewarded. Incomes were stagnating, but consumption continued to rise, because the Shadow Banking system and Network Finance allowed home owners to monetize paper gains." (Pg. 42) He adds, "By the middle of 2006, the virus of bad lending and the scourge of Pro Forma disease were spreading from housing to Wall Street and to corporate America at large. The ethos of Dumb Money was migrating from the bottom-feeders---subprime lenders---to the aristocrats of the financial services industry: investment banks, private equity firms, and hedge funds. The Smart Money crowd would prove the avatars of a period of even Dumber Money." (Pg. 46) Later, he notes, "we began to see the classic signs of the late stages of a bubble: truly dangerous self-confidence among leading players and evidence that a financial phenomenon was crossing over into the larger culture." (Pg. 58)

He asserts, "And in 2008, we would all get really, really sick. Having run out of Greater Fools on which to offload risk, the Shadow Banking system would find a new class of fools with infinitely deep pockets: American taxpayers." (Pg. 81) He admits, "Sure, the mortgage industry had produced a fair number of crooks. But they were mostly responsible for small-time bad acts. In the case of the biggest and most expensive systemic failures---Lehman Brothers, AIG, Fannie and Freddie---managers were craven, stupid, and incompetent, but not probably criminals." (Pg. 97)

He concludes, "Despite what the Smart Money crowd argued... this crisis was not a random, once-in-a-lifetime thing that fell out of the sky. It was a man-made product that turned out to be immensely toxic and damaging. And we'll be paying for the cleanup for a long time." (Pg. 100-101)

Not a detailed analysis of the 2008-2009 financial crisis, this passionately-argued tractate is nevertheless a compelling overview for those who want such a "high-level" overview, from a firmly "progressive" standpoint.
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on February 29, 2016
I enjoyed the book as it was fairly clearly laid out and was easy to follow. However, much of the book seemed to be based on personal opinion. And of that personal opinion it seemed like a pretty strong liberal bias. However a good short read, but there are certainly better books on the financial crash.
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