13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (56 page)

McDonald, Lawrence G., and Patrick Robinson.
A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers.
New York: Crown Business, 2009.

Sorkin, Andrew Ross.
Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves.
New York: Viking, 2009.

Tett, Gillian.
Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe.
New York: Free Press, 2009.

Wessel, David.
In Fed We Trust: Ben Bernanke’s War on the Great Panic.
New York: Crown Business, 2009.

Zuckerman, Gregory.
The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History.
New York: Broadway Business, 2009.

Academic Economics and the Financial Crisis

Cassidy, John.
How Markets Fail: The Logic of Economic Calamities.
New York: Farrar, Straus & Giroux, 2009.

Fox, Justin.
The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street.
New York: Harper Business, 2009.

Economic and Policy Analyses

Goodman, Peter S.
Past Due: The End of Easy Money and the Renewal of the American Economy.
New York: Henry Holt, 2009.

Hacker, Jacob S., and Paul Pierson.
Winner-Take-All Politics: How Washington Made the Rich Richer—And Turned Its Back on the Middle Class.
New York: Simon & Schuster, 2010.

Huffington, Arianna.
Third World America: How Our Politicians Are Abandoning the Middle Class and Betraying the American Dream.
New York: Crown, 2010.

Jarsulic, Marc.
Anatomy of a Financial Crisis: A Real Estate Bubble, Runaway Credit Markets, and Regulatory Failure.
New York: Palgrave Macmillan, 2010.

Krugman, Paul.
The Return of Depression Economics and the Crisis of 2008.
New York: W. W. Norton, 2009.

Pozen, Robert.
Too Big to Save? How to Fix the U.S. Financial System.
Hoboken, NJ: Wiley, 2009.

Rajan, Raghuram G.
Fault Lines: How Hidden Fractures Still Threaten the World Economy.
Princeton: Princeton University Press, 2010.

Reich, Robert B.
Aftershock: The Next Economy and America’s Future.
New York: Knopf, 2010.

Ritholtz, Barry, with Aaron Task.
Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.
Hoboken, NJ: Wiley, 2009.

Roubini, Nouriel, and Stephen Mihm.
Crisis Economics: A Crash Course in the Future of Finance.
New York: Penguin Press, 2010.

Smith, Yves.
ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism.
New York: Palgrave Macmillan, 2010.

Stiglitz, Joseph E.
Freefall: America, Free Markets, and the Sinking of the World Economy.
New York: W. W. Norton, 2010.

Subprime Lending and the Housing Bubble

Gramlich, Edward M.
Subprime Mortgages: America’s Latest Boom and Bust.
Washington: Urban Institute Press, 2007.

Katz, Alyssa.
Our Lot: How Real Estate Came to Own Us.
New York: Bloomsbury, 2009.

Shiller, Robert J.
The Subprime Solution: How Today’s Global Financial Crisis Happened, and What to Do About It.
Princeton: Princeton University Press, 2008.

History

Ferguson, Niall.
The Ascent of Money: A Financial History of the World.
New York: Penguin, 2008.

Frieden, Jeffry A.
Global Capitalism: Its Fall and Rise in the Twentieth Century.
New York: W. W. Norton, 2006.

Kindleberger, Charles P., and Robert Aliber.
Manias, Panics, and Crashes: A History of Financial Crises,
fifth edition. Hoboken, NJ: Wiley, 2005.

Phillips, Kevin.
Wealth and Democracy: A Political History of the American Rich.
New York: Broadway Books, 2003.

Reinhart, Carmen M., and Kenneth S. Rogoff.
This Time Is Different: Eight Centuries of Financial Folly.
Princeton: Princeton University Press, 2009.

Trading, Derivatives, and the Culture of Wall Street

Das, Satyajit.
Traders, Guns and Money: Knowns and Unknowns in the Dazzling World of Derivatives.
Harlow, England: Prentice Hall, 2006.

Lewis, Michael.
Liar’s Poker: Rising Through the Wreckage on Wall Street.
New York: Penguin, 1990.

Partnoy, Frank.
F.I.A.S.C.O.: Blood in the Water on Wall Street.
New York: W. W. Norton, 2009.

———.
Infectious Greed: How Deceit and Risk Corrupted the Financial Markets.
New York: Henry Holt, 2004.

Taleb, Nassim Nicholas.
Fooled by Randomness: The Hidden Role of Chance in Life and in the Markets,
second edition. New York: Random House, 2005.

BLOGS

The financial crisis significantly increased the popularity and importance of many blogs focusing on economics, finance, and public policy. Blogs enabled commentators to offer almost immediate reactions to breaking news stories or policy announcements, and policymakers began paying attention to bloggers as an important audience. There are hundreds of worthwhile blogs that cover economics and economic policy. These are some of the ones that we read, with apologies to those that we are sure to have overlooked.

The Balance Sheet (James Surowiecki):
http://www.newyorker.com/online/blogs/jamessurowiecki/

Beat the Press (Dean Baker):
http://www.prospect.org/csnc/blogs/beat_the_press

Calculated Risk:
http://calculatedriskblog.com

The Conscience of a Liberal (Paul Krugman):
http://krugman.blogs.nytimes.com/

J. Bradford DeLong’s Grasping Reality with Opposable Thumbs:
http://delong.typepad.com/

Econbrowser (Menzie Chinn and James Hamilton):
http://www.econbrowser.com/

Econlog (Arnold Kling, Bryan Caplan, and David Henderson):
http://econlog.econlib.org/

Economists’ Forum (Martin Wolf and guests):
http://blogs.ft.com/economistsforum/

Economist’s View (Mark Thoma):
http://economistsview.typepad.com/

Economix (
New York Times
reporters and guest economists):
http://economix.blogs.nytimes.com/

Executive Suite (Joe Nocera):
http://executivesuite.blogs.nytimes.com/

Free Exchange (
The Economist
):
http://www.economist.com/blogs/freeexchange/

Interfluidity (Steve Randy Waldman):
http://www.interfluidity.com/

Ezra Klein:
http://voices.washingtonpost.com/ezra-klein/

Making Sense (Paul Solman):
http://www.pbs.org/newshour/economy/makingsense/

Greg Mankiw:
http://gregmankiw.blogspot.com/

Marginal Revolution (Tyler Cowen and Alex Tabarrok):
http://www.marginalrevolution.com/

Naked Capitalism (Yves Smith and others):
http://www.nakedcapitalism.com/

Planet Money:
http://www.npr.org/blogs/money/

Real Time Economics (
Wall Street Journal
):
http://blogs.wsj.com/economics/

Rortybomb (Mike Konczal):
http://rortybomb.wordpress.com/

Felix Salmon:
http://blogs.reuters.com/felix-salmon/

Acknowledgments

This book is the product of a friendship that began twenty years ago and a collaboration that began at the peak of the financial crisis in 2008. Along the way, many people have contributed in many ways to making this book possible.

After Simon discussed the “American oligarchs” on
Bill Moyers Journal
in February 2009, Don Peck of
The Atlantic
invited us to write an article about the relationship between emerging market crises and the 2008–2009 financial crisis; that article, “The Quiet Coup,” presented some of the initial ideas that developed into this book. Our agent, Rafe Sagalyn, helped us frame our ideas in book form and guided us through the world of publishing. This book would not exist without the support and assistance of our editor, Erroll McDonald, and the many other professionals at Pantheon, Knopf Doubleday, and Random House who transformed words on a computer screen into a book that you can hold in your hands—Jeff Alexander, Peter Andersen, Paul Bogaards, Fred Chase, Molly Erman, Lily Evans, Angela Hayes, Altie Karper, Dan Ozzi, Kate Runde, Sonya Safro, and no doubt others we have overlooked.

Many other friends and colleagues provided valuable assistance as we were writing this book. David Moss, Thomas Philippon, Ariell Reshef, and Robert Shiller graciously shared data or charts. Daron Acemoglu, Anders Aslund, Fred Bergsten, Jim Boughton, Ron Feldman, Peter Fox-Penner, Jeff Frieden, Joe Gagnon, Dan Geldon, Larry Glickman, Todd Gormley, Michael Greenberger, Steve Haber, Alyssa Katz, Amir Kermani, Se-Jik Kim, Mike Konczal, Pradeep Kumar, Nosup Kwak, Subir Lall, Lawrence Lessig, Richard Locke, Jonathan Macey, Bruce Mann, Matt Matera, Brad Miller, Todd Mitton, Don Peck, Mahmood Pradhan, Jim Robinson, Jeff Rosen, Marcus Ryu, Felix Salmon, Paul Solman, Alex Stricker, Arvind Subramanian, Janet Tavakoli, Zephyr Teachout, Peter Temin, Poul Thomsen, Elizabeth Warren, Steve Weisman, and Gary Witt provided feedback on specific ideas or portions of the manuscript. Rachael Brown, Hilary McClellan, Jessica Murphy, and Eleanor Smith checked thousands of the facts contained in this book. Matt Matera edited the citations in our endnotes. Matt Matera, Maggie Wittlin, and Daniel Winik pitched in with proofreading. Jonathan Macey helped James find the time for this book while a full-time student at law school.

Our work over the last year and a half has benefited from the input of editors and journalists in other media. Besides Don Peck and Bill Moyers, they include Catherine Rampell of Economix at
The New York Times;
Frank Foer, Richard Just, and Ben Eisler of
The New Republic;
Clay Risen and Ethan Porter of
Democracy: A Journal of Ideas;
and Adam Davidson and Alex Blumberg of NPR and
This American Life.

Simon has enjoyed the constant support of many people at both MIT Sloan School of Management and the Peterson Institute for International Economics, beginning with the unflappable Deborah Cohen. He benefited from his presentations at MIT, including a joint session with Larry Fish, and from the participants in his Global Markets and Global Entrepreneurship Lab classes. Dave Schmittlein, Rob Freund, and JoAnne Yates allowed Simon to teach (on very short notice) a course on the global financial crisis, which aided in developing our ideas. Along with Steve Eppinger, S. P. Kothari, and Richard Locke, they have been consistently supportive in all regards. Simon’s co-teachers—Jonathan Lehrich, Richard Locke, and Anjali Sastry—have helped make the past eighteen months possible. Fred Bergsten, head of the Peterson Institute, provided a unique environment for constructive debate. Generous funding from the Smith-Richardson Foundation and from Lynn Rothschild was a great help. Among Simon’s many colleagues at Peterson, Arvind Subramanian and Steve Weisman deserve special thanks for their availability and feedback.

Many of our ideas were first presented on our blog,
The Baseline Scenario,
where they received the benefit of scrutiny from hundreds of thousands of readers and constructive criticism from thousands of commenters. Without the readers who make it worthwhile, the blog would not exist; and without the blog, this book would almost certainly not exist. Graham Smith, one of our readers, suggested the quotation from
The Great Gatsby
that is the epigraph to this book. We have also learned and benefited tremendously from interactions over the Internet with the large, vibrant, and growing community of economics, finance, and public policy bloggers; for a small selection, see the Further Reading section. In addition, even a brief glance at the Notes will demonstrate that we could not have researched this book without the tremendous work done by many journalists to investigate the causes and the course of the financial crisis.

Peter Boone worked closely with us on several major articles for our blog and for other publications, including “The Next Financial Crisis: It’s Coming—and We Just Made It Worse,” in
The New Republic.
Peter’s unparalleled insights into financial markets and the global economy helped us develop and hone many of the ideas presented here.