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Financing Failure: A Century of Bailouts Paperback – January 10, 2012
"Enlightenment Now: The Case for Reason, Science, Humanism, and Progress"
Is the world really falling apart? Is the ideal of progress obsolete? Cognitive scientist and public intellectual Steven Pinker urges us to step back from the gory headlines and prophecies of doom, and instead, follow the data: In seventy-five jaw-dropping graphs, Pinker shows that life, health, prosperity, safety, peace, knowledge, and happiness are on the rise. Learn more
"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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* 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.
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.
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.
When combined, the extensive footnotes persuade the reader that no stone was unturned in researching the history of bailouts. There are some similarities in McKinley's book to Carmen Reinhart and Kenneth Rogoff;s better known THIS TIME IT IS DIFFERENT, but McKinley actual career places him better to give the 'inside baseball' point of view.
As someone who has had a similar career to McKinley, I don't fully support his conclusions, but I am very impressed with his research and how he builds his case. This is not light reading but strongly recommended for those who have a deep interest in how we came to present financial sector policy.