Boomers, Markets & Money

A Down-to-Earth Discussion of Financial and Lifestyle Information for Baby Boomers

Book Review — “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It”

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Two experts wrote a book about the recent financial meltdown and our broken banking system.

What’s different about this book is that it is written so simply and clearly that anyone can understand it. Academics Anat Admati and Martin Hellwig, who have spent their careers studying the financial system, picked apart the causes of the 2007-2009 crises. They have come up with simple, cost-effective changes that can make the banking system safer for everyone.

Now, I’m not going to lie to you. It’s not going to be as much fun as reading a favorite murder mystery or, dare I say, Fifty Shades of Grey.

But I highly recommend you read this book because:

  • Nothing has changed. “As of this writing, in October 2012, this system does not appear to be better equipped than it was in 2000-2006 to limit the buildup of risks or than it was in 2007-2009.”
  • The average, responsible person has paid as steep price for the reckless behavior of others. “…in discussing the costs of the intervention politicians and regulators, like bankers frequently ignore the enormous costs of the crises to the broader economy—the loss of output in the recession, job losses, and hardships associated with foreclosures.”
  • You will be able to understand arguments that are used to scare and confuse people.

Admati and Hellwig’s recommendations for bank reform

  • Figure out which banks are insolvent and unwind them in an orderly way.
  • Higher equity levels should be required by law. Banks’ functions do not require so much debt. However, bankers’ compensation often gives them an incentive to borrow too much.

If you read this book you will be better able to understand arguments made by bankers, lobbyists, politicians, and regulators. We all need to stand up for safer banking practices. We need and deserve a safer, more stable economy.   ####

My post “Book Review- Exile on Wall Street: One Analyst’s Fight to Save the Big Banks From Themselves” discusses the banking industry from a bank analyst’s point of view.

I added some photographs of architectural details of a beautiful Providence, Rhode Island landmark. Old Stone Bank, founded as a mutual savings bank, is defunct. Click on any of the images to see a short slide show.

Author: financeboomer

Boomers, Markets & Money is a down-to-earth discussion of financial and lifestyle information

One thought on “Book Review — “The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It”

  1. Pingback: Paul Volcker: Why Are We Here With No Regulation? | Boomers, Markets & Money

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