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Restoring Financial Stability: How to Repair a Failed System Hardcover – March 23, 2009

ISBN-13: 978-0470499344 ISBN-10: 0470499346 Edition: 1st

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Product Details

  • Hardcover: 416 pages
  • Publisher: Wiley; 1 edition (March 23, 2009)
  • Language: English
  • ISBN-10: 0470499346
  • ISBN-13: 978-0470499344
  • Product Dimensions: 6.3 x 1.4 x 9.4 inches
  • Shipping Weight: 1.3 pounds (View shipping rates and policies)
  • Average Customer Review: 4.7 out of 5 stars  See all reviews (6 customer reviews)
  • Amazon Best Sellers Rank: #556,973 in Books (See Top 100 in Books)

Editorial Reviews


"In conclusion, this book should be read by every serious observerof the crisis. It is an outstanding contribution." (LombardStreet)

"…ably tackles complex issues and covers a wide spectrumof the current debate, including the multiplicity of regulators,the need for international regulatory coordination, transparency,fair value accounting, compensation reform, and the extent to whichmonetary policy should address systemic asset bubbles." (TheInvestment Professional)

“…the book that best combines history, analysis andprescription is “Restoring Financial Stability”, aseries of essays by academics at New York University’s SternSchool of Business. The 60-page prologue is packed with tellingfacts and sophisticated analysis, and alone is worth the steepcover price. The individual chapters deal methodically with themyriad issues raised by the crunch, and the policy changes thatwill be needed, covering everything from the American mortgagemarket to the need for international cooperation in regulatingfinance." (The Economist)

"We are always better analysts with a 20/20 hindsight. Indeed,an ex post reading about events leading up to a crisis appearslogical, and often leaves one with the question about why theevolution of the crisis could not be seen and corrected in time.Still, policy-makers know that such a review and understanding areimportant to learning from mistakes. Restoring FinancialStability (Wiley) acts as a catalyst to that understanding byoffering a comprehensive sequencing of the causes and progressionof the build-up of the financial strains that . . evolved into afull-blown global financial crisis. . . highly recommendedeven though bankers will remain bankers and will probably figureout ways to beat the new system." (Business Standard)


"This an excellent book. It is the first academic book to considerthe crisis in depth and to propose policy responses and solutions.. . broad and deep overview of the crisis [that makes] suggestionsfor how to minimize the chances of a recurrence going forward. . .essential institutional detail and makes sensible and oftenoriginal suggestions for reform. One of the remarkable aspects ofthe book is the speed with which it was produced. . . This bookshould be read by every serious observer of the crisis. It is anoutstanding contribution."
Franklin Allen., Nippon Life Professor of Finance,Wharton School of the University of Pennsylvania in

"The best available on this extraordinary and fascinatingsubject. . . brilliant idea, superbly executed, and has first-classcontent. Buy it."

Customer Reviews

4.7 out of 5 stars
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See all 6 customer reviews
The book's organization and editing makes it seem as if it was written by a single author.
Michael Israel
For several reasons, Restoring Financial Stability (RFS) is the best book on the current crisis by a long ways.
Samuel J. Sharp
The different chapters of the book do a great job of finding the reason for different elements of the crisis.
Yogesh Upadhyaya

Most Helpful Customer Reviews

22 of 22 people found the following review helpful By Samuel J. Sharp on May 10, 2009
Format: Hardcover Verified Purchase
I read this book immediately after I finished Cooper's The Origin of Financial Crises which was highly recommended by the usually trustworthy Economist. For several reasons, Restoring Financial Stability (RFS) is the best book on the current crisis by a long ways. I am shocked that there is only one Amazon review so far.

RFS is neither dumbed-down nor overly complex. Anyone who reads the Wall Street Journal or Financial Times will easily grasp the material covered and the language being used. The sources cited for the individual essays are predominately articles from academic journals but the authors of RFS do a nice job of summarizing the important points from these articles rather than assuming the reader is familiar with the sources. I am a history major and had no trouble following the authors.

You do not need to be interested in the solutions proposed in order to buy the book. The policy recommendations are brief and follow the much more important background information covering the causes and progression of the financial meltdown.

The book is especially worth reading because of its refreshing objectivity. It is not a political book or an anti-capitalism book. It tells the story of self-interested actors altering their behavior according to the incentives before them. The book focuses on these incentives and how they might be adjusted in order to achieve the same ends without the risk of harmful macroeconomic effects.
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23 of 26 people found the following review helpful By EWC on June 13, 2009
Format: Hardcover
Restoring Financial Stability is the best book I've read on the crisis so far. It is filled with valuable data. It covers many different aspects of the situation. And, for the most part, it is even handed in its criticisms, never resorting to the many highly biased political explanations. But from my perspective it falls short on several counts.

Most importantly, this crisis was clearly a supply driven phenomena. It's not as though the demand for housing drove up the price of financing - quite the opposite. A worldwide excess of short-term funding drove up the price of assets. Gladly, the book does not resort to the trite argument that the Fed inflated the money supply by lowering short-term interest rates following the 2002 recession, as M2/GDP fails to convincingly confirm much if any monetary inflation. Instead, the book unfortunately makes no account of the source of this funding whatsoever. It never even crosses its radar screen. I would say that misses the forest from the trees!

The book also fails to put the US financial system and it's regulations into the proper context. In a world awash in short-term funding, banks strove to borrow and lend this capital within the confines of their limited equity and capital adequacy requirements. They did this by logically raising additional equity off-balance sheet to take advantage of segmenting capital markets and by selling risky tranches of debt with high equity requirements to outside investors. In addition to lending, banks also earn profits by holding duration risk - it's the raison d'être for banking. Banks clearly compared spreads to the equity requirements for each tranche and chose to hold tranches with the highest return. Logically designed regulation led them to hold the least risky, AAA, tranches.
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10 of 11 people found the following review helpful By Christopher Myrick on April 16, 2009
Format: Hardcover Verified Purchase
NYU Stern has put together a tremendous, comprehensive and timely guide to the ongoing financial crisis. The book superbly summarizes the roots of the crisis, the scale of the problems across the financial sector and possible public policy solutions in a clear and non-partisan manner. This is a volume that I hope finds its way to the desks of every policy maker and politician - both in the US and abroad. I would also strongly recommend this to everyone involved in banking or finance (including, and perhaps particularly, financial journalists).

For those interested in the text's contents, Stern has a fantastic site featuring on-line resources including video of the book-launch conference and executive summaries of each of the book's chapters ( [...] )
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More About the Author

VIRAL V. ACHARYA is Professor of Finance at New York University Stern School of Business (NYU-Stern), Research Associate of the National Bureau of Economic Research (NBER) in Corporate Finance, Research Affiliate of the Center for Economic Policy Research (CEPR) in Financial Economics, Research Associate of the European Corporate Governance Institute (ECGI), and an Academic Advisor to the Federal Reserve Banks of Cleveland, New York and Philadelphia, and the Board of Governors. He was the Academic Director of the Coller Institute of Private Equity at London Business School during 2008-09 and a Senior Houblon-Normal Research Fellow at the Bank of England for Summer 2008. He completed his Ph.D. in Finance from NYU-Stern and Bachelor of Technology in Computer Science and Engineering from Indian Institute of Technology, Mumbai.

His research interests are in the regulation of banks and financial institutions, corporate finance, credit risk and valuation of corporate debt, and asset pricing with a focus on the effects of liquidity risk. He has published articles in the American Economic Review, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, Journal of Business, Rand Journal of Economics, Journal of Financial Intermediation, Journal of Money, Credit and Banking, and Financial Analysts Journal. He is editor of the Journal of Financial Intermediation.

He is the recipient of Best Paper Award in Corporate Finance - Journal of Financial Economics, 2000, Best Paper Award in Equity Trading - Western Finance Association Meetings, 2003, Outstanding Referee Award for the Review of Financial Studies, 2003, the inaugural Lawrence G. Goldberg Prize for the Best Ph.D. in Financial Intermediation, Best Paper Award in Capital Markets and Asset Pricing - Journal of Financial Economics, 2005 (First Prize) and 2007 (Second Prize), the inaugural Rising Star in Finance (one of four) Award, 2008, European Corporate Governance Institute's Best Paper on Corporate Governance, 2008, Distinguished Referee Award for the Review of Financial Studies, 2009, III Jaime Fernandez de Araoz Award in Corporate Finance, 2009, Viz Risk Management Prize for the Best Paper on Energy Markets, Securities, and Prices at the European Finance Association Meetings, 2009 and Excellence in Refereeing Award for the American Economic Review, 2009, Review of Finance Best Paper Award, 2009 and Best Conference Paper Award at the European Finance Association Meetings, 2010.

He has co-edited the book Restoring Financial Stability: How to Repair a Failed System, NYU-Stern and John Wiley & Sons, March 2009, co-edited the forthcoming book Regulating Wall Street: The Dodd-Frank Act and the New Architecture of Global Finance, Wiley, October 2010, and co-authored the forthcoming book Guaranteed to Fail: Fannie Mae, Freddie Mac and the Debacle of Mortgage Finance, Princeton University Press, March 2011.

THOMAS F. COOLEY is the Paganelli-Bull Professor of Economics at the New York University Stern School of Business, as well as a Professor of Economics in the NYU Faculty of Arts and Science. The former President of the Society for Economic Dynamics and a Fellow of the Econometric Society, Professor Cooley is a widely published scholar in the areas of macroeconomic theory, monetary theory and policy and the financial behavior of firms, and is recognized as a national leader in both macroeconomic theory and business education. Professor Cooley was Dean of NYU Stern from 2002-2010.

Responding to the financial crisis of fall 2008, Professor Cooley spearheaded a research and policy initiative that yielded 18 white papers by 33 NYU Stern professors, later published as "Restoring Financial Stability: How to Repair a Failed System," (Wiley, March 2009). He also writes a weekly opinion column for

Professor Cooley is a member of the Council of Foreign Relations.

Before joining NYU Stern, Professor Cooley was a Professor of Economics at the University of Rochester, University of Pennsylvania, and UC Santa Barbara. Prior to his academic career, Professor Cooley was a systems engineer for IBM Corporation. Professor Cooley received his BS from Rensselaer Polytechnic Institute, and his MA and PhD from the University of Pennsylvania. He also holds a doctorem honoris causa from the Stockholm School of Economics.

MATTHEW RICHARDSON is a Professor of Finance at the Leonard N. Stern School of Business at New York University, and a Research Associate of the National Bureau of Economic Research. He has also held the title of Assistant Professor of Finance at The Wharton School of Business at the University of Pennsylvania. Professor Richardson received his Ph.D in Finance from Stanford University and his MA and BA in Economics concurrently from University of California at Los Angeles.

Professor Richardson teaches classes at the MBA, executive and PhD level. His MBA classes cover Debt Instruments and Markets and International Fixed Income. He is serving or has served as associate editor for the Review of Financial Studies, Journal of Finance and Journal of Financial and Quantitative Analysis. He has been a referee for over 20 academic journals, including Econometrica, Journal of Finance, Journal of Financial Economics, Review of Financial Studies and American Economic Review. In 1997 Professor Richardson was awarded the Rosenthal Award for Financial Innovation.

Professor Richardson has published papers in a variety of top academic journals, including, among others, Journal of Finance, Journal of Financial Economics, Review of Financial Studies, and the American Economic Review. His work has also appeared in practitioner journals and books such as Advanced Tools for the Fixed Income Professional, Emerging Market Capital Flows, and VAR: Understanding and Applying Value-at-Risk.

INGO WALTER is the Seymour Milstein Professor of Finance, Corporate Governance and Ethics and Vice Dean of Faculty at the Stern School of Business, New York University. He has taught at New York University since 1970. He has served as a consultant to various corporations, banks, government agencies and international institutions and has authored or co-authored numerous books and articles in the fields of international trade policy, international banking, environmental economics, and economics of multinational corporate operations.