"'Sometime in the next 12 to 18 months, there is going to be a panic in credit markets,' Andy Redleaf, a 50-year-old hedge fund manager, wrote to investors in December . 'The driver in the credit market panic of 2007 or 2008 will be a sudden...loss of faith in the alchemy of [mortgage] finance as it is currently practiced'....Whitebox Advisors, Mr. Redleaf's family of hedge funds, was not the only one to bet against subprime. But it did so with searing and amusing insight, a trademark of the founder and the firm." --Jenny Anderson, "A Hedge Fund That Saw What Was Coming" - the New York Times
"Has the makings of a classic." -- Robert Shiller, Arthur M. Okun Professor of Economics, Yale University, and author of Irrational Exuberance
"Panic vividly traces the causes of our current economic woes. The authors take you on a tour of pinhead intellectuals, politically protected bankers, and calamitous government policymakers. Panic is vital to understanding how we got here, and how we might get out." --Gil Weinreich, editor, Research Magazine
"The number of true contrarians is very small, and Andy is absolutely one of them." --Michael Harron, managing partner for TMF Capital Management
"Of all the dozens of books written on the financial crisis, Redleaf and Vigilante finally get it right...PANIC is a tour de force!" --Mark Skousen, editor, Forecasts and Strategies
"Brilliant" --Jim McTague, Barron's
"A wonderful indictment" --Jim Grant, Grant's Interest Rate Observer
"Has the makings of a classic." --Robert Shiller, Yale professor of economics who called the housing bubble in 2003
"Searing and amusing insight." --New York Times
From the Inside Flap
What happens when the nation's bankers and regulators become convinced human judgment is passé?
What happens when they abdicate decision making to an algorithm?
And then cram the algorithm with imaginary data because no one has the authority or guts to expose it as nonsense?
ANDREW REDLEAF, founder and CEO of a multibillion-dollar hedge fund and credited by the New York Times with predicting the crisis in surprising detail, and RICHARD VIGILANTE, reveal the Crash of 2008 as the "predictable outcome of an ideology that has dominated the American financial establishment for upwards of forty years."
This "ideology of modern finance" replaced the capitalist's appreciation for free markets as a context for human creativity with the worship of efficient markets as substitutes for that creativity. The capitalist understands free markets as an arena for the contending judgments of free men. The ideologues of modern finance dreamed of efficient markets as a replacement for that judgment and almost a replacement for the men.
Under the influence of contemporary financial theory, bankers and regulators abandoned basic tools of financial analysis and judgment for elaborate, statistically based insurance schemes and a blind faith in the efficiency of modern securities markets.
The result: it became impossible for either executives or regulators to fully understand the financial condition of any great modern bank. Believing that financial systems could transcend the need for human judgment the bankers and regulators combined to create financial institutions with balance sheets no one could judge.
Redleaf and Vigilante guide the reader through the history of the crash with wisdom and wit, presenting a refreshingly commonsense approach to understanding how markets actually work. Panic makes sense of a nonsensical moment in market history and reveals why booms and busts have become so common in recent decades, and what we can do about it.