285 of 316 people found the following review helpful
Useful, but not groundbreaking or controversial,
This review is from: 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (Hardcover)I'm jumping in here more to vote among the opinions already expressed than to say anything new. I mostly agree with Bruce Lasker. The book is a good straightforward history of how we got to this point in American banking, but is neither deep in its analysis nor strong in its recommendations. If the reviews had been split on this issue I wouldn't have bothered, but since its 9 to 1 against Mr. Lasker, I think it's worth making it 9 to 2.
The opinion in this book is all expressed through word choice. When the authors don't like an increase in lending it is "an orgy of lending." When they do, "banks responded with capital to support growth." People they disagree with "rant," while people they like "point out" or even "prove." But there's never any analysis to back up these opinions, they're painted onto what is basically a factual history. I happen to agree with more than half of their views, but if I didn't, I wouldn't have been convinced by this book. It doesn't help that everything is based on secondary sources, from which the authors take what they like and nothing else.
On the other hand, if you want a factual history, and either agree with the authors or are willing to ignore loaded words, this is an excellent choice. It's well-written, witty, up-to-the-minute and accurate. The opinions are never intrusive, and never foolish. They feel concentrations of banking power are dangerous, which is pretty reasonable, but they ignore the problems caused by the local corruption that grew up in its place. You learn about Jefferson, Madison and Jackson's principled objection to national banking, you won't learn about politicians anxious to create local bank monopolies for their friends and associates, restraining competition in order to maximize profit and control local economies.
You'll learn how deposit insurance and limits on deposit interest reduced bank failures for 50 years, but not how it destroyed middle class savings when high inflation combined with low legal ceilings on interest; you also won't see the terrible customer service that existed until a "shadow" banking system made an end run around the regulations and offered ATM's, high-interest money market accounts, 24-hour-banking, automated deposits, Internet banking and other innovations (when I started working you got a paper paycheck every two weeks that you had to take to a physical bank on your lunch hour as they were open only 9 to 3 on weekdays and the tellers took the same lunch hour as the office workers so you didn't eat lunch on payday, no food allowed in the bank). Sneaky overcharging and predatory lending loom large in this book, with no hint of the advantage to customers when fixed commissions were smashed or companies were forced to improve accounting disclosure.
Wall Street is always the villain, local banks that lend only to their boards of directors and pals and support the local political machine, are whitewashed. The entire S&L crisis is blamed on Wall Street sharpies taking advantage of sleepy local bankers, you won't hear that virtually the entire loss was from commercial lending by oil-patch banks whose strong political connections ran through Texas, not New York. You'll read how Wall Street money flooded into Washington in campaign contributions and lobbying, you won't read about extortion from politicians introducing legislation to expropriate people's financial businesses unless they paid up. You also won't read about the constant movement of financial innovators to get away from the whole messy business of power politics, organizing off-shore, using private vehicles and leaving regulated businesses to come up with better solutions. It's always politicians trying to draw these into the regulatory framework, where they are forced to render unto Caesar, it's not financial innovators lining up to buy political backing for their ideas. Even the harm done by the gigantic financial institutions built entirely by Washington is blamed on Wall Street, not Washington.
I'm not defending Wall Street here, just pointing out there are two sides to the story. Wall Street, and more generally global financial innovation fighting entrenched local traditional practices, has done both good and bad. Mostly it does things that some people will consider good and others will consider bad. The one point of strong agreement I have with the authors is that a system of crony capitalism grew up, and led to a lot of our current problems. Personally, I would attack all crony capitalism, not just financial, as killing it in one place just tends to encourage it to spring up in another. We have crony defense contractors, medical companies, agribusinesses among many others. I grant that financial cronies are more dangerous than the others (except maybe defense contractors) but they are more alike than different. And the fundamental reform has to be political. If someone is handing out government money, it's pointless to outlaw taking it, because someone will always find a way to break the law, and then repay the giver. Stopping the handout is the point.
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Showing 1-10 of 42 posts in this discussion
Initial post: Apr 16, 2010 12:19:26 AM PDT
Last edited by the author on Apr 16, 2010 12:22:52 AM PDT
Aristides A. Estrada says:
In reply to an earlier post on Apr 19, 2010 6:35:22 PM PDT
I think you will be half-satisfied with this book. The authors blame a combination of big business and big politics, but most of the criticism is on the big banks buying influence rather than big politicians selling it. The book celebrates use of State power to keep private organizations from growing large, wealthy and powerful enough to overwhelm governments.
The one thing everyone seems to agree on is that crony capitalism is bad. What to do about it is more controversial.
Anyway, you'll learn some useful stuff from the book, even if you disagree with the authors.
Posted on Apr 21, 2010 2:59:02 AM PDT
M. Foley says:
Do you have any recommendations for books that supplement and balance the material found here?
In reply to an earlier post on Apr 21, 2010 7:02:33 PM PDT
I liked both How Markets Fail: The Logic of Economic Calamities and The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street. These focus more on the intellectual underpinnings (or lack thereof) rather than the power politics.
In reply to an earlier post on May 11, 2010 4:47:04 PM PDT
Brian G. Ruschel says:
Wow what an absolutely great review. I like to read what a book omits. This lets me know about things not mentioned.
In reply to an earlier post on May 11, 2010 7:05:26 PM PDT
Thanks for the kind words.
Posted on Jun 26, 2010 4:05:40 AM PDT
One of the few commentaries I've read anywhere where the ugliness of "community banking" is exposed for what it usually is: the worst kind of cronyism, where deals are made among the local aristocracy at the #1 country club. (There's a #2 country club in larger towns for the up-and-coming JC's.) If you are a Jewish store owner or a person of color wanting credit from your "community bank," you might as well take a walk.
One caveat: The losses incurred in the S&L debacle were shouldered by the taxpayer, and resulted from simply terrible federal housing policy enacted over the decades since World War II. The S&L losses took many years to accumulate to the eventual $150 billion price tag. Banking losses that occurred in the late 1980s were of two kinds: New York and New England thrifts known as savings banks; and "oil patch" banks. FDIC guarantees, which were funded by semiannual assessments on commercial and savings banks, covered all of the losses in both cases, (the bulk of the losses being in the savings bank liquidations). The "oil patch" banking losses were minimized by the federal banking regulators' decisions to allow out-of-state bank holding companies to bid on the failing (mostly Texas) banks. The ten largest bank holding companies in Texas were merged in this fashion, with nary a loss to the taxpayer.
In reply to an earlier post on Jun 26, 2010 7:22:50 AM PDT
I agree with you agreeing with me, however on the second point I still maintain the lion's share of the losses in the S&L debacle were commercial lending fraud in Texas and the Southwest (with a nod to Colorado and Florida). The residential losses from honest bankers were far smaller, normal course of business events that could have been handled without taxpayer bailout. The political connections that aided and abetted the fraud were from the oil region, both Democrat and Republican.
Federal housing policy has its ups and downs, mostly downs, but prior to the early 90s the main abominations were urban renewal, project housing and sprawl. Federally-inspired foolish residential mortgage lending was not a big part of bank problems prior to 2007.
In reply to an earlier post on Jul 30, 2010 6:13:11 PM PDT
The main abomination of federal housing policy is mortgage interest deductions. Do away with it and watch consumer housing choices rationalize.
In reply to an earlier post on Jul 31, 2010 8:34:07 AM PDT
I agree the mortgage tax deduction causes major distortions, and is unfair. It has already been carved away for most people, but that makes it even more distorting. However, there are other irrationalities in the tax code that are as bad. The trouble with piecemeal reform is the reforms that increase revenue get enacted and the ones that reduce revenue don't, you end up with no more rationality and higher taxes.