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The economic crisis in books
January 15, 2010 - Mike Maneval
Robert Kuttner, writing for the American Prospect, praises a new book on the economic collapse by Robert Stiglitz, who Kuttner describes as "the world's leading scholarly expert on market failure."
And it is a description which may well fit, if his book Freefall: America, Free Markets and the Sinking of the World's Economy follows the succinct, accurate and devastating assessment Kuttner quotes here:
"America's financial markets had failed to perform their essential societal functions of managing risk, allocating capital, and mobilizing savings while keeping transaction costs low," Stiglitz writes. "Instead, they had created risk, misallocated capital, and encouraged excessive indebtedness while imposing high transaction costs."
But if the reader finds these words by Stiglitz too dry and academic, Kuttner has a solution - balance his scholarly take with one of the many titles in which the crisis unfolds chronologically, relying more heavily on first-person accounts. While Kuttner particularly recommends David Wessel's In Fed We Trust, but uses references to the more-recent Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System - and Themselves.
Too Big to Fail, by Andrew Ross Sorkin, illustrates the dishonest tactics of former Treasury Secretary Henry Paulson, from misleading congress about bailout intentions to plotting an unrealized deal to use tax dollars to purchase Wachovia - a firm headed by a former Goldman Sachs executive - as a gift of sorts for Goldman Sachs - the firm Paulson himself headed in his private-sector days.
Stiglitz explains how Wall Street continues to threaten the country's economic security. As Kuttner concludes, the aforementioned examples and others from Sorkin show how Wall Street still puts the U.S. economy "at grave risk."
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