Financing Failure: A Century of Bailouts [Paperback]

Vern McKinley (Author)

Book Description

Publication Date: January 10, 2012

With information obtained through Freedom of Information Act requests, Vern McKinley disproves the claim that federal financial regulators and politicians prevented a more severe financial crisis and argues that reining in federal regulators is a necessary step toward truly promoting the safety and soundness of the financial system.

Editorial Reviews

Review

"Financing Failure...exposes the truth behind the bailouts." -- Tom Fitton, President, Judicial Watch

"Vern McKinley's analysis of the recent bailouts...includes the most comprehensive research of the actual underlying discussions that I have seen." -- Michael W. Bell, Retired Chief Financial Officer, CIGNA Corporation

"This book should be read by anyone willing to question the crisis narrative produced by the government to justify its actions and propagated by a credulous media." -- Peter J. Wallison, Arthur F. Burns Fellow in Financial Policy Studies, American Enterprise Institute

“Financing Failure shows us the appalling lack of logic in regulators' responses to financial crises and how, sadly, we can expect more of the same in the next crisis. McKinley has produced an excellent history of the flawed analysis of financial crisis policy of the last century.”  —Jean Helwege, professor of business administration, University of South Carolina

“Reading Vern McKinley’s Financing Failure will lead you to a logical conclusion: Failure should be allowed to happen just as success should be allowed to happen. Mr. McKinley demonstrates not only that we have gone to great extremes to keep failure from happening, but also to protect the turf of the regulators who have intervened to keep it from happening. We have done this by putting at risk great sums of public funds and by creating fear in the public mind on the consequences of financial failure. To get a balanced view of the experience we are still going through, this book is a must read.”  —William Wallace, adjunct professor of economics, University of North Texas

"This is a phenomenal, detailed policy review of American bank bailouts from the 20th century onward, with a specific focus on the most recent crisis and its aftermath. . . . Going forward, I suspect I will be returning to this book often. Well done.”  —Matt Stoller, former senior policy advisor for Congressman Alan Grayson

From the Inside Flap

In the economic crisis, no issue has aroused more passion than the mega-trillion-dollar bailouts of large financial firms. The standard narrative has been one of necessity and fear, claiming the government must have greater power to respond or we all face terrible consequences.

Now in Financing Failure, Vern McKinley examines the policy decisions behind the bailouts and reveals the untold story of what happened and how this relates to the history of U.S. government intervention. Based on new revelations from documents uncovered through the Freedom of Information Act, he scrutinizes the decisions made by the Treasury Department, Federal Reserve, and FDIC during the crisis of the 2000s and connects them to decisions of the 1930s and 1980s. These findings reveal that the genesis of financial crises is government itself, be in the interventions behind the Great Depression or the mandates that pushed for expanded homeownership leading to the 2000s crisis.

Large financial firms, bailout agencies, and politicians all claim to have "saved" America (and the world) from economic catastrophe. In truth, they have done everything within their power not just to protect themselves from disastrous consequences of their own decisions. but also to expand this unaccountable influence far further. McKinley reveals the difficulty in uncovering these issues as government agencies have withheld the truth regarding their behavior from the public. Instead of honestly and openly disclosing their actions, these agencies have deliberately concealed what has happened.

Financing Failure brings transparency to government bailouts, new and old.

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Product Details

• Paperback: 384 pages
• Publisher: Independent Institute (January 10, 2012)
• Language: English
• ISBN-10: 1598130498
• ISBN-13: 978-1598130492
• Product Dimensions: 6 x 1 x 9 inches
• Shipping Weight: 1.4 pounds (View shipping rates and policies)
• Average Customer Review: 5.0 out of 5 stars  See all reviews (4 customer reviews)
• Amazon Best Sellers Rank: #538,513 in Books (See Top 100 in Books)

More About the Author

Vern McKinley is a Research Fellow at the Independent Institute.

From 1985 to 1999 Mr. McKinley worked with the Board of Governors of the Federal Reserve, Federal Deposit Insurance Corporation, Resolution Trust Corporation and Department of the Treasury's Office of Thrift Supervision. In 1995, McKinley graduated with honors from George Washington University School of Law.

Since 1999, McKinley has served as a legal adviser and regulatory policy expert for governments on financial sector issues in the U.S., China, Nigeria, Indonesia, Ukraine, Kazakhstan, Latvia, the Philippines, Yugoslavia (now Montenegro), Kenya, Morocco, Sudan, Libya, Afghanistan, Armenia, Kosovo, and Tajikistan. McKinley has completed policy work for both the American Enterprise Institute and the Cato Institute and has served as an Alumni Council member of The Fund for American Studies.

McKinley has been credited with correctly predicting in 1997 that the structure of Fannie Mae and Freddie Mac would one day lead to the meltdown of the two institutions. He has brought four Freedom of Information Act (United States) suits against the Federal Deposit Insurance Corporation, Board of Governors of the Federal Reserve and Federal Housing Finance Agency to compel release of details on the bailouts, represented in the cases by Judicial Watch. McKinley has also testified before the U.S. Congressional Subcommittee on Commercial and Administrative Law on issues related to U.S. consumer bankruptcy policy.

Vern McKinley has more than 25 years of experience working on the full range of financial stability issues, including management of central banks; financial system diagnostics and stress testing; strategies for addressing systemic banking crises; development of resolution options for failing banks; deposit insurance and bank supervision design; and coordination of interagency responses among multiple financial sector agencies. He has worked for a variety of agencies, including the International Monetary Fund, Asian Development Bank, World Bank, KfW Bankegruppe (Germany), US Treasury, and USAID. He has held positions at Deloitte / BearingPoint, PricewaterhouseCoopers, and the law firms Morrison & Foerster.

McKinley regularly speaks on financial and regulatory issues, including congressional testimony. He is a contributing author to the book Central Bank Modernisation and his articles have appeared in Forbes, Washington Times, Regulation, Sacramento Bee and USA Today Magazine. McKinley holds degrees in finance and economics from the University of Illinois and he received a J.D. from the National Law Center at George Washington University.

Most Helpful Customer Reviews

12 of 13 people found the following review helpful

5.0 out of 5 stars A Primer on the Exaggerations & Self-Interests That Led Us to Today's Reliance on Government Bailouts: January 30, 2012

By Thomas M. Loarie TOP 1000 REVIEWERVINE™ VOICE

Format:Paperback

"Financing Failure" is the sixth book I have read on 2007 economic crisis and one of the most important. In it, author Vern McKinley does not parrot the standard narrative:
* The crisis is unprecedented
* Government agencies need to expand powers to respond to the crisis
* "Main Street" will be severely impacted if the largest financial institutions were allowed to fail
* Interventions are necessary to "save us" from a great depression
But rather, focused on the public policy issues and "shows a century of public officials making vastly exaggerated claims regarding the effects of short-term government intervention (bail-outs) and of long-term legislative changes, dating from initial passage of the Federal Reserve Act in 1913 through the Dodd-Frank legislation in 2010." His brilliant historical analysis of bailouts shows why we have become so reliant on such interventions and why they get bigger with each financial crisis.

Readers of "Financing Failure" will discover:
* History is repeating itself.
* There has never been any evidence of impending doom that the entire financial system was at risk..
* With each pressing crisis, interventions got broader and more entrenched.
o The number of those bailed out were expanded
o The number of federal agencies were increased (permanent government intervention)
* Rife with regulatory breakdowns, agencies do little to instill confidence as they fly by the seat of their pants.
* Agencies do everything in their power to hide and shield their actions.
* Used all their powers at their disposal to prevent outside review.

"Financing Failure" is different from the other books I have read as it focuses 1) on policymaking, not people, behind the decisions to bail out institutions, not just during the recent crisis but over history, and 2) on how decisions were made, the data that informed the decisions, and the justifications for legislative changes in the wake of financial crises.

Previous books take as fact that government intervention was absolutely necessary without questioning it. McKinley, however, shows this is not true as he takes the gloves off and provides a critical analysis regarding the bailouts based on information retrieved through the Freedom of Information Act (had to bring suit to get data). He shows that the need for government intervention has been perpetuated by self-interested participants who have a stake in the financial collapse and in the government's response to it - the largest financial institutions, agencies which regulate the financial institutions and politicians who recommended and approved the bailouts

Interventions do not save the economy nor do they protect us from great recessions or depressions. Interventions only serve to reward self-interested parties, and, in doing so, greatly expand government to the detriment of personal liberty. While a hefty work, "Financing Failure" is a must read for those interested in the truth about what has transpired over many years...something that sorely needs to be reversed.

3 of 3 people found the following review helpful

5.0 out of 5 stars For serious students of financial crises! April 23, 2012

By Jack

Format:Paperback

Mr. McKinley's book is three things. First, he presents the history of regulatory response to financial crises - showing how key actors intervened in the banking industry in the 1930's, 1980's and 2000's. Second, he draws lessons from each of these interventions to clearly show the "ad hoc" nature of government action, all while showing the apocalyptic rhetoric that accompanied such action. Finally, Mr. McKinley tells the story of his efforts to force the Fed, the FDIC and the FHFA to produce evidence of their decision-making process in the US's most recent crisis.

Any one of these would make a compelling book. Mr. McKinley does all three well - in clear and precise prose. His assessment of Dodd, Frank as a mechanism for preventing future crises (Surprise! It won't!) is worth the price of the book alone.

I commend Mr. McKinley on a book well researched, well-written and that is timely. Any serious student of the regulatory response to financial crises should read this.

3 of 3 people found the following review helpful

5.0 out of 5 stars Very Well Documented Read March 24, 2012

By David

Format:Paperback

This book shows the reader the mistakes that have been made over and over again in dealing with problem banks, the politics that went into decisions that impacted all of us for many years, and the lack of information or misinformation that has been used in determining what actions to take with problem banks. It is very well documented in the footnotes, and allows the reader to determine whether regulators were right or wrong in taking specific actions when problems were noted.

Mr. McKinley, as a former bank regulator and current banking consultant, tells the story with expertise, but in plain language for those who are not as familiar with banks and regulators. The book is an honest, unbiased account of the history of bank failures, void of any political slant, but rich in information that should be required reading for legislators, bank regulators, professors and students as it gives an account of how things work in the "real" world vs. how average people believe they work.

This is a must read for people to see the mistakes of the past and to try to ensure that they will not happen again.