My Review of Nomi Prins's Book "All The Presidents' Bankers" (Shamefully Late Due To Extreme Blog Host Laziness)

I was given a FREE COPY by the author, in which she asked UNCONDITIONALLY for 2 things: Reading ALL of the book before giving my review, and giving my HONEST opinion (good or bad) on the book.  I had voluntarily promised the author I would have a blog post/review up by the end of August 2014, and I shamefully failed to deliver on that promise.  Mainly because I am a lazy S.O.B.  Which I should apologize to Nomi Prins for being late in my review, but that has no bearing on my review, good or bad.  

In case you haven't noticed (heavy ladle of sarcasm) this isn't the New York Times or even Andrew Sullivan's The Dish in terms of traffic or internet page visits, so it was extremely kind and benevolent of Nomi Prins to give me a copy.

First it should be said that about the time you get halfway thru the first chapter of "All The Presidents' Bankers", it becomes obvious that Miss Prins did an exhaustive amount of research in the writing of this book.  She did a lot of legwork on this (and what fine legs she has, can I get a rimshot??), digging in libraries and Presidential museums and scanning through all the minutia, so that we the readers could see the connections without getting the migraines she must have got hunting this stuff down and connecting the parts of the matrix.  I will confess the reason I first became drawn to Miss Prins is she is quite attractive on TV.

But the book shows her vast intellect in not only being able to scour for important details in the historic record, but also being able to see the relationships (not always apparent on the surface) between the players.  It's hard to write books on topics like this and find that "magic line" between making things easy to understand for the audience and not talking down to the reader. Miss Prins found that magic line.

Ok, if those pics don't give you a crush on Nomi Prins like I have (Miss Prins is getting "creepers" right about now if she's reading this) then you might get a crush if you see how clever this woman is in  this lecture:
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The beginning point of the book covers Theodore Roosevelt's relationship with the large bankers.  This (unlike the vast majority of President-to-BigBanker relationships in the 20th century) relationship was a contentious one. Even going back to the early 1900s we can find correlating figures to our modern corrupt senators such as Bob Corker and Dick Shelby.  We can pretty definitively say that Chauncey Depew was the Dick Shelby of his day.  Senator Depew took about $50,000 in bribes to do as he was told by the railroad and insurance companies. And it's worthy to note $50,000 in 1905 was A LOT more than $50,000 in 2015 terms. You might ask "What does that have to do with Dick Shelby?" Well, I'm so glad you asked. There is a website called opensecrets.org at which you can look directly at Dick Shelby's Top 5 campaign contributors. See here:
https://www.opensecrets.org/politicians/summary.php?cid=N00009920&cycle=2014#cont

So what are we to learn from this??  These type bastards like Dick Shelby and Chauncey Depew have been with us a long time.  Even under "ideal conditions" it's hard to keep all the Dick Shelby types out of the system.  But if we don't pay attention to who the politicians' "sponsors" are (who often have direct control over the writing of the laws/legislation) we will be continually and perennially burying our heads in the sand.  VOTING IS IMPORTANT. And there are candidates out there Elizabeth Warren, Zephyr Teachout (who lost), Tim Wu (who lost his bid to become lieutenant governor of New York).  There are candidates out there who are very worthy of being elected and are still losing elections. Why?? Is it their failure for not making people aware, or voters failure for not reading newspapers and keeping self-educated on the candidates?? It's an open question.

Early on in "All The Presidents' Bankers" Miss Prins also discusses an infamous meeting (rarely discussed in recent media publications) at Jekyll Island which happened in 1910.  Jekyll Island was an island resort for the super-elite located just off the coast of Georgia.  At this Jekyll Island meeting, which was kept very secret, a small group of some of the nation's most powerful men created what would become the Federal Reserve System. Which one could argue from its very inception has only served the interests of large bankers (and not the small depositors they claim to serve).  There has been strong evidence (revealed within the last 6 months) to show The Federal Reserve System largely views its main and possibly sole duty (including its "regulatory" arm) as that of being a protector and facilitator of TBTF ("too big to fail") banks' power:
http://www.propublica.org/article/carmen-segarras-secret-recordings-from-inside-new-york-fed

SIDE NOTE: One thing that fascinates me about human beings is we often buy into outlandish conspiracy theories (martians, vaccines for authoritarian control, fluoride used as a brainwashing tool, a dark-skinned President as the "anti-Christ" etc.)  But many credible conspiracy theories (such as this Jekyll Island meeting) somehow get lost in the haze of mass media to where they are seemingly new revelations when someone like Nomi Prins digs through the public record.  It reminds me of the "Seven Executives of Big Tobacco" testimony to Congress. Which people seem to act now like it never occurred:


Also the fact that huge media conglomerates make intentional efforts to hide information from the public, or even participate in boldfaced LIES. As anyone can see from the rare "company man" honesty of CBS guy Lowell Bergman:


BACK TO THE REVIEW Some of the figures mentioned in "All The Presidents' Bankers" I dare say have never been "household names". Yet they have had a deep and broad impact on American public policy (both domestic and foreign policy) and are worthy of knowing to understand large bankers' influence on the history of the American government..  Thomas Lamont was a large and influential banker. Albert Wiggin.  Sidney Weinberg had a lot of political influence (for appointees and filling Presidential administration jobs). And Walter Wriston's name pops up a fair share.  Others might be more commonly known, such as Paul Warburg (of Warburg family fame),  J.P. Morgan, and David Rockefeller who was immensely powerful in the decades of the '60s and '70s (and arguably beyond that).  Robert Rubin (formerly of Goldman Sachs and now mostly affiliated with CitiGroup) was HUGELY influential during the Bill Clinton Presidency, and arguably still holds sway and pulls many strings with the Obama Presidency to this very day. 

In recent years more Americans have come to see that what often our federal government proclaims as "altruistic" its motives and actions overseas, the reality is those actions are for pragmatic reasons, to consolidate or keep grasp on power. Think of the "necessity" of the Iraq war.  When most Al Qaeda operatives were natives of Saudi Arabia and/or currently hiding in Afghanistan or Pakistan (Pakistan remember is what John Kerry calls our "partner on terror" all the while they provided refuge for Osama Bin Laden very near to a Pakistan military base) "W" Bush decided to go on a glamorized goose chase in Iraq .  Think of the African nations, or Bosnia where genocide occurs and America sits idly watching.  NO oil reserves to be snatched there, eh??"  What does that have to do with Nomi Prins's book 'All The Presidents' Bankers' ??" you might ask.... I am so glad you asked. Ever heard of something called "The Marshall Plan"??  Winthrop Aldrich (Chairman of Chase Bank from 1934-1953) was a big proponent and champion of  "The Marshall Plan". Why?? A flow of capital into Europe meant creating a future fertile ground for loans and interest revenues for large American banks.  Was the Marshall Plan all bad?? In the book reviewer's opinion, no. But neither was it a "benevolent" act, as the Marshall Plan has often and nearly always been portrayed by American media.  This is only one of many of the added perspectives and added context  Nomi Prins's efforts in the Truman Library have given us, for which this reader is grateful.

NAFTA was used in a similar way as the Marshall Plan. To extend loan agreements and increase debt burdens of Mexico, mostly to the enrichment of American banks.  John McCloy (Chairman of Chase Bank from 1953-1960) was a man who spent a great deal of time and effort licking his chops and salivating over loans to Latin America. (Interestingly McCloy was also a member of the Warren Commission investigating John F. Kennedy's assassination.)  The cynical (or less naive) among us might ask: "What credentials did John McCloy have in crime scene investigation or forensics??".  Never you mind kids, go back to watching "American Idol" and "The Bachelor"---ignorance is bliss.

There are many interesting and delightfully fascinating gems to be found in the book (family connections, nepotism, "you scratch my back I'll scratch your back" behind the curtains operations) that Nomi Prins reveals in this treasure of a book.  But if I went through them all it would take the fun out of reading the book. 

On a 1 to 10 scale, 10 =perfect 5=average 1=trash

"GrahamBrokeTheMold" blog gives "All The Presidents' Bankers" a 10!!!

GO BUY IT!!!!
http://www.amazon.com/All-Presidents-Bankers-Alliances-American/dp/156858749X

Until then you can watch Nomi Prins's thoughts on recent market activity (around January 2015) in European currencies and other topics in this video:

Book Review: James Kwak & Simon Johnson's "White House Burning"

Dim the lights to roughly the amount of light in an above average beer bar in China at 10pm, cue theme music from Harry Lime: The Third Man....



I got my book through Amazon.  Roughly $17.  I ordered weeks ahead of publication and it arrived USPS on April 7 which was a Saturday.  It was tightly rapped in cardboard and came in excellent condition.  I like the cover design and the red lettering (I never seem to tire of red on books or sports jerseys).  At first I didn't really like the book title, but seeing its connection to history it seems more appropriate now.  The book begins with a recount of events leading to the British burning down the White House on August 24, 1814 (didn't remember learning this in History class growing up, but that's probably more due to my short attention span than my grade school teachers).  It's quite fascinating in the sense this easily achieved bonfire (mainly intended as distraction) by the British was easily achieved because U.S. government budget short-falls caused by a lack of vision (or prudence) of the "Democratic--Republicans" (what would be thought of accurately as the Republican Party of that time, though in actuality a separate entity from what would eventually become the Republican Party we know today).  The Democratic--Republicans had been stubborn sticklers, refusing to raise much needed taxes (otherwise known as government revenue) in anticipation of resources and salary for soldiers needed to subsist and sustain a competent army force to fight against Britain.

Kwak and Johnson are obviously trying (successfully) to draw a comparison between the inadequate taxation for the national needs of those historically crucial times (crucial to the survival of a nation in its infancy) and the extremist anti-tax sentiment held (rightly or wrongly) by a significant number of Americans today.  Alexander Hamilton seems to look very heroic from the rear view mirror perspective of history. Starting around 1790 Hamilton had worked (in his position as Treasury Secretary) to improve America's fiscal policy, bringing down the debt through creation of a national bank, excise taxes, restructuring of debt, etc.... This in fact was beneficial to the nation's long-term strength, but was opposed by Thomas Jefferson and James Madison as they felt that small government vis-a-vis small taxes was the better way to go.  Unlike the Republican Party of today, which mainly specializes in hateful obstructionism, Jefferson and Madison had good and mainly altruistic intentions.  Nevertheless, in the lead up to an expensive and destructive war, not having sufficient government revenues to pay for that war was the wrong policy choice.

In this wonderful book, we also see other historic characters and historical parallels that may "ring a bell" in some people's minds. A Philadelphia banker by the name of Stephen Girard helped to underwrite an extremely large loan in 1813 when the U.S. Government was desperate for funds.  This reminded me a little of Warren Buffett, his loan to Goldman Sachs, and also Buffett's and other experts' promotion of the idea of "CoCo" bonds (contingent convertible bonds, see here, here, and here).  This allusion to Girard shows us that America long ago (during the "Founding Fathers" era often given lip-service to by the Teabaggers Party) faced situations where an extreme anti-tax policy has put America in dire straits.  


If we recognize that tax revenues pay for many things that are in fact beneficial to us, it might give us a better perspective on policy decisions. Also, one might add, when the revenues are put to good use, it makes more sense to raise the government revenue in taxes (which require no interest to be paid later) than in debt, which requires interest payments.  It behooves us, to raise the money from government revenue, rather than through debt.  In other words, outside of temporary adjustments for economic crises and emergency situations (war, terrorist attacks), we should match tax rates (revenues) to our long-term spending needs.  

Editorial aside: A fair amount for all the government services we get (in the book reviewer's opinion) might be more than 13.9% or a tax rate so low that we felt ashamed or embarrassed to reveal it.  Imagine paying only 13.9% in federal tax rates and also receiving $37 million in government subsidies.  Of course, $37 million received 19 years ago, would be worth much more than $37 million received in 2012.  But what's a few million grafted from the Indiana "local yokels " while telling voters about your "battles" in the "free market"??  When tax dollars go to Mitt Romney, we're not taxpayers, we're all just good friends!!!

Back to the book review....


The first 3 chapters of the book largely deal in the fiscal history of the U.S., past eras' different income tax rates, and the timing of new (new at the time) government programs such as Medicare, Medicaid, Social Security etc.  This is the most colorful part of the book and has more of a "human interest" aspect of the story than later chapters.  I won't go over all the historical parts of the book as it's way too much fun to discover on your own, and I don't want to give out any "spoilers" to the story.  But it definitely adds to understanding of our current situation and reads fast.  Incidentally, I am a glacially slow reader, and I finished the 240 pages of this book in exactly 10 days, so trust me, it is a quick and fun read overall.  A mild warning though, for those not into government budget minutia: the beginning of chapter 7 onward can get a little dry.  But isn't it worth the effort to be a better voter and a better citizen?? Isn't it worth a little effort to go to the voting booth in November armed with deeper and substantive knowledge, gleaned from more than just an unsettling headline??  Some men and women went to wars (in their most precious years) so you could have the right to vote.  Is it too much to ask, in appreciation of their sacrifice if not for your own benefit, to read a book?? Voting should be based on an intelligent choice and not a 30 second "sound-bite".  If it is too much to ask, then did those soldiers die in vain for your right to vote?? Going through the motions of voting and getting a sticker on your shirt is not "patriotic" in and of itself.  Voting responsibly and equipped with a deeper than surface knowledge can feel more than patriotic. It can almost feel like a spiritual experience. Deep pride for sure.


Moving on to Chapter 4, this part of the book is quite educational, and almost mandatory for the rest of the book (especially if you are a "layman" or novice on federal government budgets).  This part of the book has some extremely useful terminology (some of which the authors put in bold print for easier reading).  What is the difference between the words debt and deficit?? Often times it seems in the news the words debt and deficit are used interchangeably, but it's important to know the difference.  What about discretionary spending vs. mandatory spending?? Do you know the difference??  If politicians throw these words at you quickly on TV, would you scratch your head in bafflement?? If you don't know the terminology or "lexicon" how can you expect to have full understanding when you go to the voting booth?? Can you get past the "fear-mongering" and "hot button" words politicians might be using just in order to manipulate your thought process??  Words are sometimes used to generate an emotional response or "stir up" voters to the point they turn off their brains. The book "White House Burning" helps you get past that!! 


There are also terrific graphs in the book which show in pictorial terms the major parts of the federal budget, and also explaining how we relate % of debt in relation to GDP (gross domestic product) and how we relate % of spending in relation to GDP.  

• How much of government revenues come from individual income tax vs corporate income tax??  
• When you hear numbers quoted from CBO (Congressional Budget Office) can you trust them?? Are CBO numbers generally reliable to quote when discussing the federal budget and/or politics?? More reliable than the 3 times divorced recovering pill addict Rush Limbaugh when he tells you something about the federal budget??
•   Is healthcare becoming more expensive because of increased government benefits or because of age demographics??
•  Is it possible to cure federal deficits if you refuse to raise taxes---ever???
•  If the Bush tax cuts of 2001 and 2003 were allowed to expire, would we be nearer to a deficit solution or making it unattainable??  
• If Social Security and Medicare were cut or a "voucher system" was used, would you be responsible to take care of your elderly parents health bills and housing?? Who would pay for your parents' healthcare, food, heating bills if Medicare and Social Security were cut?? Would Republican Paul Ryan pay for your parents' hospital bill??
•  Would Bank of America or Goldman Sachs pay for your parents' health bill??  Is Wal-Mart's employee health plan going to pay for your elderly parents' health bills?? 
•  Which private company would come to your parents rescue in their old age if they had cancer?? Will Ford Motors pay for a home nurse to feed your father if he gets Alzheimer's disease??
• Will healthcare costs be eaten by society no matter the existence or non-existence of Medicare and Medicaid??  If government isn't paying for your Social Security, Medicare, and Medicaid then who exactly did you think was paying for those things IF IT WASN'T THE GOVERNMENT??  Tinker Bell, the Disney fairy?? Or did you think Donald Trump was sneaking off to pay your elderly parents' hospital bill during a commercial break of "The Apprentice"??

Some of the above questions obviously are not answered directly in the book. And you might have already guessed that Tinker Bell wasn't sending that Social Security check (never saw pixie dust on it, did you??).  But "White House Burning" can give you a basis for answering most of these complicated questions with your own mind with the added knowledge base and perspective that this well-researched book plenteously provides.

Progressing onward to Chapter 7 we get something that a lot of politicians refuse to provide or will make great effort to dance around: Definitive prescriptions on changes to the federal government budget (with indirect impacts on state and local budgets) which would provide large year-over-year savings to the nation's federal deficit (with some kind "nudges" to also help state and local level government revenues).  Kwak and Johnson step strongly to the plate and swing a mighty bat on budget issues, even though some of their proposed solutions will not win either gentleman "Mr. Popularity" crown of 2012.  A brief rundown of some of the major budget savings prescriptions (no pun intended) given by Kwak and Johnson (this list is not comprehensive, you still need to read the book):

• Allowing the 2001 and 2003 Bush tax cuts to expire. (the Congress needn't pass any new laws to achieve this, just do nothing---like usual)
• Increase the earnings cap on payroll taxes (the cap is currently $106,800).  16% of the earnings now escape the payroll tax.  Only 10% escaped the payroll tax in 1983.  This is because of increasing salaries and also increased inequality.  The authors propose the cap be indexed to cover 90% of earnings (that is to say 90% of the earnings would be taxed at either a 12.4% rate or at authors' proposed slightly increased 13.4% rate)
• Phase out (gradually) the employer health plan exclusion (tax break).  This would lower demand, lower health care spending, and thereby slightly slow down health care cost inflation. Elimination of this tax break would increase government revenues by roughly 0.6%.
• Introduce a carbon tax. Authors suggest a $20 per ton of carbon dioxide which equates to (roughly) 18cents extra per gallon of gasoline.
• A 50 cent increase in the gasoline tax (which would make it $1 total).  The carbon tax and gasoline taxes would probably be regressive (most of the tax would hit low-income or middle income folks) so the authors suggest a rebate offered to poor households taken from the increased revenues of the tax itself.
• A TBTF (too big to fail) fee (I love the word fee here) on financial institutions based on size and riskiness.  Come on now, honest to God, think of all the times you got screwed at an ATM machine on fees (for the use of your own money) and maybe just once on an overdraft---wouldn't it be sweet as honeycomb to make your banker eat a fee??  Unlike many bank fees though, this is a legitimate fee to create a fund for future financial crisis.  The fee would also discourage bankers from taking risk, as the fee would be increased as the bank increased in leverage (debt instruments) or carried garbage assets (such as sub-prime loans) on its balance sheets.  For community banks or Credit Unions with conservative asset portfolios (and directly familiar with the people they loan to) the fees would be very small.  Maybe the fee rate could encourage the originator of the loan keeping the loan, and therefor more conscientious about the loan origination process.
• The authors speak extensively on the elimination of what are called "tax expenditures". What are tax expenditures?? In the authors' accurate definition "Tax expenditures are laws that use the tax code as a means of distributing money to people.  Tax expenditures allow individuals or companies to reduce their taxes if they do certain things that the law is trying to promote."  One of the most renowned examples would be the tax deduction for interest on a home mortgage.  Elimination of most tax expenditures would increase government revenues while at the same time reduce economic distortions such as the housing bubble that the mortgage deduction assisted in causing.

There are many terrific things in the book "White House Burning" and I can honestly say reading it was a labor of love. And I'm the lazy type so that's saying a lot coming from me. "13 Bankers" is one of the top 10 Economics/finance books I have read in my life.  Where does "White House Burning" stand by comparison to "13 Bankers"??  It stands quite well, with "13 Bankers" winning out.  But both books are very very worthy of your time, and I believe have contributed greatly to enriching the dialogue, bringing out points that would have otherwise gone unsaid, giving me sustenance for my hope in America's future, and making me grateful for two upper-crust, upper class, hyper-educated, and affluent gentlemen named James Kwak and Simon Johnson.  Two men who have made efforts to excel in our private economy and have done exceptionally well in our economy, but aren't "above" seeing "the little guy" have ample opportunity as well.


GrahamBroketheMold Book Rating on 1 to 10 scale, 10 being the best: 9


Special Notes: 
Positives: The book has an outstanding index, and is annotated very well.  This is key for any good quality book (Check Sarah Palin's first book for index).  Kwak and Johnson avoid personal attacks.  The graphs in the book were used in the exact right amount, not overkill but adding visuals which made for easy grasp of budget issues which can be confusing.


Negatives: Wish there had been a little more humor in the book.  Although America's budget problems are serious issues which don't exactly lend themselves to vaudeville comedy,  I know at times Mr. Kwak and Mr. Johnson have a wicked sense of humor SEE HERE, and they need to unveil that humor more in their books. After all, some medical specialists might make great hedge fund managers.  Be wary if your doctor mentions "active management" fees though (those last 2 sentences was a joke).


Go buy the book NOW!!!!!

Book Review: Kwak and Johnson's "13 Bankers"

Well, finally today I'm going to give my official review of "13 Bankers" James Kwak and Simon Johnson's book on the financial crisis of 2007--2009.  Not a minute too soon since I've already recommended the book for purchase before I had read it (I'm a very very perceptive person you know).

Dim the lights to roughly the amount of light in an above average drinking bar in China at 10pm, cue theme music from Harry Lime: The Third Man....

I ordered this book through one of the more famous internet suppliers, and if you order over $25 dollars of books you get free shipping.  This book cost me $15.75, so I ordered a couple old novels for myself and some paperback garbage for a relative to go with it, so the total shipment took some time (one of the books has yet to arrive, but it's not important to my little review here).  I ordered it around April 2 and I want to say it took about 20 days to arrive.  I was quite excited when it arrived through U.S. Post Office Mail.  Grinning like some 5 year old with his red fire engine toy he had just opened.

The cover seems good quality (although the color is more midnight blue, not the dark turquoise it seems when you look at the internet image of the cover).  The paper is of the quality you would expect of a good quality hardcover book and the book feels like something of substance when you hold it in your hand.  Pantheon is the publisher, which I guess is part of Random House and it says it is printed in the USA.  Just inside the back cover we can see respective photos, in black and white, of both authors.  Both looking like amiable fellows.

The main body of the book is 222 pages long.  It reads quite fast.  Chapter One covers some American history, which gives the book quite a different feel than 99% of the other what I would call "econ crisis books" coming out recently.  It talks about a battle between Thomas Jefferson and Alexander Hamilton.  A battle over both ideology and power.  Basically Thomas Jefferson was fighting a virtuous fight against too much concentrated power.  This battle against concentrated power would rage on over scores of years between different "point men" if you will.  Andrew Jackson vs. Nicholas Biddle,  Theodore Roosevelt vs. the trusts (J.P. Morgan and John D. Rockefeller),  Franklin Delano Roosevelt vs. the Big Bankers of the 1930s.  This struggle for power is part of human nature, and it moves ever onward, as Kwak and Johnson express so well.  But the battle against concentrated power has been won before, and so this reading of history can give us great caution as to how the dangers of concentrated power are almost always there.  But also this reading of history can give us confidence that we had courageous men in America who fought this battle before, and we most likely have those few courageous men somewhere in our society presently (President Obama, do you hear the call???  The call to be a great and courageous President??? A leader people will remember with great fondness???).

Chapter 2 covers oligarchs and emerging market crises.  This Chapter feels like it was written mainly by James Kwak (but obviously I don't know that, so apologies if I am mistaken).  The main example focused on here is South Korea.  South Korea had had a great deal of economic success during the 1990s but hit a brick wall in late 1997.  Economic contagion had started in Thailand and eventually worked its way through other Asian countries to South Korea.  Foreign investors got the jitters and yanked their capital out.  There are a surprising amount of characteristics with parallel America's crisis of 2007--2009. And here is where authors Kwak and Johnson make an extremely valid and sound point which is difficult for some American ears to receive:  America has been extremely arrogant and hypocritical when providing economic assistance to countries going through turmoil.  The IMF (which is largely influenced by U.S. funding) and the U.S. Treasury forced prerequisite conditions on South Korea which were very heavy handed (such as foreign bondholders and banks being paid in full while South Korean companies were struggling).  Now the authors' point it seems is not that these forceful conditions for monetary assistance were wrong, but why the U.S. Treasury didn't prescribe the same disciplines on its own country (America) during the bailout of 2008--2009.  The book also includes a fascinating quote by Larry Summers on this hypocrisy, which is fascinating since he was in U.S. Treasury at the time of the South Korean crisis of 1997 and also played a large part in the planning of the U.S. bailout in 2009 as a member of NEC (National Economic Council) with the President's attentive ear.  This chapter also touches on economic crises in Russia and Indonesia.

Chapter 3 covers the ushering in of "Reaganism" around 1981.  During Ronald Reagan's presidency, deregulation became more popular in the 1980s than disco in the 1970s.  The deregulation was also driven by fascinating characters such as Donald Regan.  This eventually and indirectly led to the Savings and Loan Scandal of the late 1980--early 1990s (does the name "Keating Five" ring a bell??).

Chapter 4 largely addresses regulatory capture and the revolving door between Wall Street and Washington.  Regulators are much less likely to enforce laws in the industry they are regulating when they know they will have a high paying job in that same industry in the near future.   Very very few regulators were willing to walk up to the plate and perform their actual duties, and when they did perform their duties they were muffled and cast aside like a piece of trash.  Brooksley Born was one of the few heroes here (or heroines). Raghuram Rajan also wrote a paper questioning the wiseness of deregulation and was shot down for heresy by the Federal Reserve hierarchy.  The fact of the matter is saying Alan Greenspan absolutely failed at 50% of his duties (regulatory official) as Chairman of the Federal Reserve would be overly kind.  Towards the end of the Chapter 4 also talks about how homeownership was oversold as part of the "American Dream" to people who couldn't afford it, and only paid many monthly mortgage payments with high interest rates to end up with nothing.


Chapter 5 gets into the passage of the Commodity Futures and Modernization Act and how it eventually resulted in fraud on the American taxpayer, by having to subsidize large banks' risky behavior  creating and trading credit default swaps, CDOs, naked CDS, synthetic CDS, and the sale of Option-ARMS mortgages to people the banks full-well knew would never be able to pay the entire mortgage.  One of the best parts of "13 Bankers" is at the bottom of page 127 to the top of page 128.  Here Kwak and Johnson explain how the large banks scurried to purchase and swallow up sub-prime lenders.  In fact, although this is superb writing here, I wish Kwak and Johnson had followed through on this part of the story more. Large bankers and Republicans have often used the old canard, tired argument, and red herring that the Community Reinvestment Act (CRA) forced them into mortgages they didn't want.  Like Uncle Sam was holding a gun to their head to make loans.  This is pure garbage.  And the fact is, as the authors show here, that the large banks swallowed up and craved sub-prime lending companies like it was the last meal on earth.

Chapter 6 goes into great detail of the bailout/TARP program and the numerous problems, contradictions, and friendships that greased the wheels of this great sham on the American taxpayer.  Including Secretary of Treasury Timothy Geithner giving AIG's creditors 100 cents on the dollar, when AIG had already been negotiating with their creditors (other large banks) for a settlement as low as 60 cents on the dollar.  Ratings agencies like Moody's and Standard and Poors (S&P) being paid money to stamp AAA ratings on bundled (packaged) garbage (ARMS loans that would never be paid, combined together and sold as a security).  These bundled (packaged) garbage loans were securitized and labeled CDOs (collateralized debt obligations).  Another interesting gem from this chapter is one of the people often defined as a heroine in this saga (not the book but the entire crisis) was Sheila Bair. And yet Miss Bair (along with other regulatory agency heads) didn't hesitate to shoot down the creation of the Consumer Financial Protection Agency when she felt her Agency (bureaucracy??) turf being threatened.  Maybe Bair was giving us a flash of her true colors??

Chapter 7 goes back to the authors core argument---that large banks (extremely high market share) equal concentration of power, concentration of power leads to regulatory capture, and regulatory capture leads to publicly funded (taxpayer) bailouts.  This 3 step process is one which is incredibly obvious and simple to grasp, and yet some Nobel Prize winners cannot grasp it's simple truth/factuality.  It gets back to core American values that we hold (and even Brits such as Martin Wolf hold) in our hearts as virtuous.  Thomas Jefferson wouldn't have it any other way, and neither will James Kwak and Simon Johnson.

GrahamBrokeTheMold book rating on 1 to 10 scale, 10 being best:  "13 Bankers" gets a 9 rating


Special Notes:  


Positives: I want to outline some things I especially liked about the book, and some small problems here.  4 things I really love about this book: 1--the book has an index. 2--the book is very well annotated. 3--Kwak and Johnson avoid personal attacks. They stay tunnel-visioned in their core philosophical and ideological arguments. 4--The graphs in the book are superb and well selected.  The graphs were terrific.

Small negatives (nitpicking):  I wish the authors had said more about the Canadian banking system, and why their system seemed to be much less affected by the credit crisis.  I think whatever their views are on this, they could have and should have said more about the Canadian banking system and how it differentiates from the American banking system.  And I wish the book had a little more of James Kwak's humor.  His wry humor is one of the better parts of his blogging.  My guess is the graveness and seriousness of the topic (the future of America) kept Kwak away from using humor, but a little in the right moments would have been great.

It's a great book!!! Be a patriot, a knowledgeable voter, and go out and buy it NOW!!!!