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The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy's Only Hope Hardcover

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Product Details

  • Hardcover: 320 pages
  • Publisher: McGraw-Hill; 1 edition (September 6, 2012)
  • Language: English
  • ISBN-10: 0071806776
  • ISBN-13: 978-0071806770
  • Product Dimensions: 9 x 6.2 x 1.1 inches
  • Shipping Weight: 1.2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.6 out of 5 stars  See all reviews (126 customer reviews)
  • Amazon Best Sellers Rank: #25,654 in Books (See Top 100 in Books)

Editorial Reviews Review

Amazon Exclusive: Post-Election Commentary from Author John A. Allison

The 2012 election has reinforced for me that the U.S. has a simple choice – return to the principles that made us great or face economic decay and social unrest. One of the reasons I wrote my book is because it seemed to make sense to have someone who had an inside and comprehensive understanding of the causes of our financial problems to comment on the issue. In the aftermath of the recent election, it’s even more important for the public and policy makers to understand what drove the financial crisis and what choices we must make to revitalize our economy.

The media and other statists have created a myth that the financial crisis was caused by banking deregulation and greed on Wall Street. However, banks were not deregulated. In fact, three major new regulations were passes during the Bush Administration: The Privacy Act, The Patriot Act, and Sarbanes-Oxley. Banks were misregulated, not deregulated. Also, there has always been plenty of greed (and fear) on Wall Street. However, there is not one shred of evidence there was a greed plague that swept the Street.

The financial crisis and failed recovery were primarily caused by government policy. The two main culprits were errors made by the Federal Reserve and government housing policy, specifically as executed by Freddie Mac and Fannie Mae, the giant government-sponsored enterprises that would never have existed in a free market.

My book, The Financial Crisis and The Free Market Cure covers this and other economic myths and misunderstanding such as the “shadow” banking system, fair value accounting, Pick-a-Payment mortgages and the like. However, as interesting as the economic discussion is, the real solution for our financial problems is philosophical and the cure was espoused by Thomas Jefferson in the Declaration of Independence: “Life, Liberty, and the Pursuit of Happiness.”

People on all sides of the political spectrum defend liberty, but few people understand why liberty is essential to human well-being. Government regulations put “balls and chains” on innovators and entrepreneurs and thereby, slow and eventually stop progress. Given man’s nature, socialism and communism are doomed to failure.

So, again, I say, the US has a simple choice: The laws of mother nature and human nature are not subject to popularity or political whim. Capitalism or decline. You choose.


"John Allison has written easily one of the most important books of the year. Go out and buy it." (Forbes 2012-10-17)

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Customer Reviews

This book is well written and informative.
Jaime Jesus
And one of the primary points that he makes is that *systemic failure* of the financial markets can occur ONLY as the result of government policy.
Ron Housley
This book was an eye opener in many ways and I am glad I read it and am now rereading it.
Douglas P. Henderson

Most Helpful Customer Reviews

73 of 78 people found the following review helpful By Ira E. Stoll VINE VOICE on October 5, 2012
Format: Hardcover Verified Purchase
I was pretty much of the belief that the last thing America needed was yet another book on the financial crisis.

But this book is so good that it's worth reading. Mr. Allison brings to the table both a free-market perspective and firsthand experience as a bank executive (CEO of BB&T) during the crisis. Few if any of the journalists, economists, and government officials who have written that bookshelf-full of other books on the topic have that to offer.

Here are some examples of things that I was unaware of until I read Mr. Allison's book, even though I have already read a lot of other books, reports, and articles and watched a lot of congressional hearings and commission meetings about the financial crisis:

*When the FDIC took over Washington Mutual, it paid uninsured depositors in full using money that would have gone to bondholders. Writes Mr. Allison: "This was in complete contradiction to past practice. The bondholders suddenly realized that there is no rule of law when government regulators are involved...The decision to treat WaMu bondholders this way closed the capital markets for banks."

* "Banks spend hundreds of millions of dollars hedging mortgaging servicing rights," which are "an accounting fiction." He writes, "I once had a highly ranked partner at one of the biggest accounting firms tell me that no more than 10 people understood all the interconnections among mortgage servicing rights, mortgage origination income, and derivatives valuation. I think he exaggerated. I do not think anyone understood."

* "The Patriot Act represents a practically impossible regulatory environment for banks because it is in direct conflict with the Privacy Act (which was also passed during the Bush administration).
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58 of 65 people found the following review helpful By Edwin A. Locke on October 2, 2012
Format: Hardcover Verified Purchase
This is the first and clearly the best book to explain the causes of the financial crisis. John Allison reports not just from the outside but from the inside. BB&T which he led for 20 years gave him access to what happened not only in his bank and markets but in Washington. He shows that the crisis was caused primarily by the Fed (the number one villain), the FDIC, govt housing policy, Fannie and Freddie, TARP, and boatloads of insane and harmful regulations. He shows also that crony capitalism (actually crony socialism)played a key role from beginning to end. He shows that the government's goal of expanding home ownership caused a massive misallocation of capital (from production to consumption.) He is not afraid to name names. He demonstrates that the fundamental cause of crises such as this are philosophical. He argues convincingly that the only real solution to diaasters like this (including the destruction of our economy) is pure capitalism backed by the philosophy of self interest guided by reason. This is a brillaint and heroic book that I recommend everyone read if you want America to survive.
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44 of 54 people found the following review helpful By Geraldine Ahearn TOP 500 REVIEWERVINE VOICE on September 27, 2012
Format: Hardcover
Industry Expert, John A. Allison delivers a detailed, comprehensive analysis of the causes and solutions to America's financial meltdown. The author describes clearly the right steps to take for improvement and recovery, while describing what the wrong things would be to do as he provides information on who is to blame for a crash. In addition, he explains how and why free market capitalism is good for the economy, and how this is our only hope. An inside view of the events that led to the crisis is presented, along with the impact of government incentives on real estate markets, and how government regulations made it worse. Solutions are provided on how to promote free market, the effects of bailouts, and how to end unemployment. Practical advice is also given on how Washington can help Wall Street for a better future, and steps on how to clean up the mess. Reports are presented on what to do now for the entire financial industry as Allison conveys that failure was not of free market, but of government. A description is also provided of the impact of our government response to the crisis and the consequences. This expert analysis is a valuable contribution to the debate about America's future economy. Comprehensive, thought-provoking, concise, and Highly Recommended to all Americans!
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26 of 31 people found the following review helpful By Andrew Layman on September 30, 2012
Format: Hardcover Verified Purchase
John Allison give a uniquely from-the-inside look at the recent financial crisis and shows that the cause was government manipulation of the economy, which provided strong incentives for irrational behavior, coupled with government regulation, which obstructed rational thought and action.

Examples pile up: the Federal Reserve caused a housing bubble through artificially low interest rates; Fannie Mae and Freddy Mac drove Savings and Loan Associations out of the mortgage market then made massive quantities of loans to people who could not afford them and which could never be repaid; the SEC forced banks to shrink their reserves against bad loans; FDIC insurance and the Fed's low interest rates lulled depositors and investors alike into neglecting the soundness of banks; government-sanctioned rating agencies inflated the grades of mortgage-backed securities; erratic bailouts of crony-favored institutions like Countrywide, Washington Mutual, General Motors, and General Electric destroyed the rule of law and drove the panic deeper.

But Allison does more than identify that the root financial cause of the crash was government intervention in the economy. He names the political ideas and specific steps necessary to effect a cure: full laissez-faire capitalism, starting with deregulation, disengagement, and sound money.

Allison then - in what are my favorite chapters in the book - describes the moral values and virtues that each of us can practice to make our lives rational, productive, confident, and happy.

The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy's Only Hope is a diagnosis and prescription for moving off the road to ruin and back to the vision America was founded on, a path of prosperity and personal happiness.
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