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Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (The Princeton Economic History of the Western World) Hardcover – February 23, 2014

4.1 out of 5 stars 57 customer reviews

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Editorial Reviews

Review


Winner of the 2015 PROSE Award in Business, Finance & Management, Association of American Publishers



One of The Times Higher Education Supplement's Books of the Year 2014, selected by Sir Howard Davies



One of Bloomberg Businessweek's Best Books of 2014, chosen by Mervyn King and Jeffrey M. Lacker



One of Financial Times (FT.com) Best Economics Books of 2014, chosen by Martin Wolf



Longlisted for the FT & McKinsey Business Book of the Year 2014


"Brilliant. . . . [I]f you are looking for a rich history of banking over the last couple of centuries and the role played by politics in that evolution, there is no better study. It deserves to become a classic."--Liaquat Ahamed, New York Times Book Review

"Business economists Calomiris and Haber explain how imperfectly politics and commercial banks intersect, and the consequences for the rest of us. . . . This learned inquiry deserves ample attention from scholars, regulators, and bankers themselves."--Publishers Weekly

"Calomiris and Haber offer a thoughtful counter-argument to the current received wisdom."--Howard Davies, Times Higher Education

"Readable, erudite, myth-busting. . . . The authors' clear and well-documented discussion of what happened should dissuade anyone of the myth that the economic crisis of 2007-09 was caused by the profit-and-loss system of unfettered capitalism."--Gene Epstein, Barron's

"Charles Calomiris and Stephen Haber make the compelling argument that a country's propensity for frequent banking crises is linked to the ability of populist elements to hold the banking sector to ransom."--Louise Bennetts, American Banker

"This is a great history of political interference in bank regulation."--James Ferguson, Money Week

"One reason why economists did not see the financial crisis coming is that the models most macro and financial economists deal in are free of politics. Fragile by Design offers a much-needed supplement."--Martin Sandbu, Financial Times

"Will a next crisis be averted? Perhaps, if our regulators read this book."--Vicky Pryce, The Independent

"Fragile by Design . . . is a great book. . . . [E]normously illuminating, and contains the most powerful and concise account of the causes of the 2008 crisis that I have seen."--Eric Posner, EricPosner.com

"If you have time to read only one book about the causes of the 2008 financial collapse, read this one. . . . Charles W. Calomiris and Stephen H. Haber . . . have written an exhaustively researched and readable volume. . . . With great literary sensibility uncommon to economists, Calomiris and Haber have performed a public service by painstakingly identifying these root causes."--Diana Furchtgott-Roth, National Review

"Capital markets, regulatory institutions and the behaviour of people employed in the financial sector are neither predetermined nor universal, but rather the product of culture, history, and the political system. That is a perspective developed effectively by Profs Calomiris and Haber."--John Kay, Financial Times

"[T]he methodology is universally applicable and obviously raises questions about the nature of these arrangements in a country like France. . . . [T]his work allows us to understand better why . . . the alleged remedies and reforms, from 'unconventional measures' major central banks to new regulatory structures, no way affect the old paradigms and therefore merely prepare the next crises."--Phillipe Ries, Mediapart

"Exploring the ways in which politics inevitably intrude into banking regulation, Calomiris and Haber clearly describe events leading to the recent financial crisis of 2007-2009. . . . This is an excellent work for understanding the role of credit and how the financial sector evolved in different settings."--Choice

"This is a beautifully-written book. Calomiris and Haber are always thoughtful, always clear, and they have an eye for the telling metaphor and the thought provoking fact. More importantly, the book reflects the authors' mastery of a vast amount of material on the history of banking. . . . Fragile by Design is a must-read for economic historians, a book to be put on the shelf with . . . similar classics."--Hugh Rockoff, EH.Net

"[I]f you want a methodology for drawing conclusions about the genesis of crises and an explanation for the differing experiences among countries, Fragile by the Design is the winner hands-down."--Vern McKinley, Cato Journal

"Charles Calomiris and Stephen Haber's Fragile by Design is a magnificent study of the economics and politics of banking."--Mervyn King, Bloomberg Businessweek

"Hands down the best single book for understanding the historical journey that laid the groundwork for the financial crisis."--Jeffrey Lacker, Bloomberg Businessweek

"Fragile by Design is a call to action for people to seize the moment to resist crony capitalism."--Jay Weiser, Weekly Standard

"One cannot help but admire Calomiris and Haber's ambition to write one of the most accessible and sophisticated books on the linkage between political institutions and national financial systems."--Caner Bakir, Public Administration

"By any yardstick, Fragile by Design is a remarkable achievement and an important contribution to our understanding of the roots of the banking crises."--Grant Bishop & Anita Anand, Banking & Finance Law Review

From the Back Cover


"A seminal political economy analysis of why banking varies so much across countries, with such profound consequences for economic development and social welfare. Not just fascinating and original, but also right."--James Robinson, author of Why Nations Fail


"A monumental intellectual and scholarly achievement that will shape thinking on finance and politics for decades to come. A book for the ages, whose insights are delivered in a lively, punchy, and nontechnical narrative."--Ross Levine, University of California, Berkeley


"A major contribution to our understanding of banking, showing why nations need banks, why banks need the state, and how the quality of banking depends on how the 'Game of Bank Bargains' is played between politicians, bankers, and a penumbra of key protagonists."--Charles Goodhart, London School of Economics and Political Science


"What explains the dramatic variation across countries in the extent, structure, regulation, and fragility of banking? Calomiris and Haber provide a tour de force resolution of the question. Their answer: politics. Fragile by Design's synthesis is shockingly original and convincing."--Darrell Duffie, Stanford University


"A remarkably detailed account of the sources of banking and financial failure under different institutional rules. A masterful achievement and a must-read for banking scholars, analysts, and regulators."--Allan Meltzer, author of A History of the Federal Reserve


"Fragile by Design bristles with insights about how conflicting private interests, intermediated through political institutions, have sometimes produced banking and social insurance arrangements that make financial crises much more likely than they should be."--Thomas Sargent, Nobel Laureate in Economics


"Why do America's banks go bust so often? Fragile by Design draws back the veil that hides the murky world where politics and big money meet, and exposes the surprising truth--that the banks were built to fail. Read, learn, and keep your cash close at hand!"--Ian Morris, author of Why the West Rules--for Now


"Fragile by Design explains why the U.S. banking crisis of 2007-2009 is no aberration, but only the latest episode of a populist bargain gone awry. This is a powerful entry in the debate on how to fix the postcrisis world."--Raghuram Rajan, author of Fault Lines


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Product Details

  • Series: The Princeton Economic History of the Western World
  • Hardcover: 584 pages
  • Publisher: Princeton University Press (February 23, 2014)
  • Language: English
  • ISBN-10: 0691155240
  • ISBN-13: 978-0691155241
  • Product Dimensions: 1.5 x 6.5 x 9.8 inches
  • Shipping Weight: 2 pounds (View shipping rates and policies)
  • Average Customer Review: 4.1 out of 5 stars  See all reviews (57 customer reviews)
  • Amazon Best Sellers Rank: #299,393 in Books (See Top 100 in Books)

Customer Reviews

Top Customer Reviews

By Gregory Gilman on March 29, 2014
Format: Hardcover Verified Purchase
Calomiris and Haber tackle a very ambitious project here. They seek to do three things. First they offer a concise survey of the history of banking. Second, they advance a theory to explain why some countries have had much more stable banking systems than others. Third they attempt to use this theory to explain the recent financial crisis in the U.S.

In my opinion, they succeed brilliantly in most of the historical summary. They do a respectable job of advancing a theory of banking stability. Unfortunately they do a terrible job when they try to shoehorn the recent financial crisis into this theoretical framework. This is less surprising than it appears at first glance. Good historical analysis is always hardest to do with relatively current events.

Everyone's views about banking regulation are grounded in their personal opinions about economics and politics. I will not attempt to hide my opinions here but I hope to write a review that will be useful to potential readers of the book whether or not they share my opinions.

Good summaries of banking history are hard to find and this one is superb for the most part. The authors are excellent writers. They present their ideas in an articulate and engaging way. They avoid unnecessary jargon and build their theory in a clear and systematic way. They make effective use of analogies and often turn a memorable phrase. That said, there is enough detail and repetition here to limit the book's appeal to a mass audience.

The book's central thesis is that stable banking systems require democracy but not too much democracy. Those political systems that contain institutional checks on the populist tendency to expropriate the assets of the banking industry are the ones that have been the most stable. The U.S.
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Format: Hardcover
The first good thing I could say about this 506 page book, was that I bought it with the intention of skipping past the sections which I was less interested in, ... but never found any such sections.

We have recently learnt the hard way that banks (or the financial sector in general) are a special and important part of our economies. This book highlights how and why. Banks are central to the needs of all governments and their populations, while at the same time the nature of the countries politics and government are key to how that countries banking system develops and behaves. This does not apply to the same degree to any other non state sector of industry or commerce.

A concept of "bargains" made between banks and governments alongside other sectors of society, can at first come across as a bit of an esoteric pet academic theory. But the more you read, the more you realise it is in fact a very effective way of describing the shabby and messy reality of how this codependency and co-evolution between banks and their host countries happen.

For the main body of the book they create a collection of insightful and instructive case studies, or I would say banking fables, based on the situations and histories of a variety of countries. In common with the best kind of economic history writing, so many times I was left thinking things like: Yes of course that is why Brazil had high inflation; Yes, of course that is how banks and autocratic governments would rub along together; Yes, of course that is how that group would have bargained given that situation. You get the picture.

The authors fall neither into the outraged banker bashing camp, or the stubborn 'there is no alternative' free market camp.
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Format: Hardcover Verified Purchase
Suggest ignoring the politically motivated reviewers who underrate anything that questions their point of view. This book doesn't dogmatically accuse everyone living in Manhattan of a sucking greed sufficient to collapse the world economy; so, of course, it's balance is inappropriate for witch hunters.

In fact, the book isn't about private (ex: investment) banks. It's about chartered banks and gives context for banking, how US banking compares to other nations. It takes a pretty evenhanded look at the role government plays through regulation, rationing valuable charters and government's relationships with banks and bankers.

The book offers interesting insight on the 2007-8 crisis, to be sure. For those who have read Milne or Gorton on the financial crisis, this is an interesting companion piece, stepping back from financial markets and the instrumentation that was too advanced for regulation and too sophisticated for its own good. For those who have Michael Lewis as their primary exposure, this is essential to balance the perspective and provide a context for what banks are, particularly here in the US.

The authors expose the role of GSEs and government's role therein (CRA agreements and GSE mandates). Today, when there's now a shrunk market for private mortgage financing and nearly all of our eggs are in the Fannie and Freddie basket, understanding the details is very important.

Regulatory failure is also discussed, and there's a good bit about "piles and piles of ineffectual regulation," countering the tired ideas that deregulation or insufficient quantities of regulation led to the crisis. I'm for regulation, too, but let's get rid of the stuff that doesn't work and make it the right regulation.
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