Financial Crisis Reading List

This list will be updated and shared regularly on Google+ and elsewhere

These readings cover the history of how federal laws changed, how state banking laws ("bucket shop laws" among them) were invalidated, and how financial regulations were eliminated or became outdated or weakened as innovations happened in the financial industry. They also describe how the world's biggest financial institutions have been allowed to bet tens of trillions of dollars (as tracked by the Bank of International Settlements in Switzerland) on interest rates, currency exchange rates, commodities futures, swaps, options, bundled mortgages, etc. (OTC derivatives allow funds to place a bet on virtually anything if a dealer can find a counterparty.) As some of these bets have gone bad, they turned into the "toxic assets" that former Goldman Sachs CEO Henry Paulson (as Secretary of Treasury) wanted (and received) $700 billion in an attempt to remove these "assets" from the banks' balance sheets. Since the initial TARP bailout, the Federal Reserve and Treasury have cooperated using other programs to get trillions of dollars of these illiquid "assets" off the books of the banks which are deemed "too big to fail." These readings show how modern capitalism has become what some have called "casino capitalism" and how representative democracy has been corrupted. As a result, the whole global financial system has been placed at risk.

BOOKS AND ARTICLES:

"Very risky business - derivatives," Senator Byron Dorgan, Washington Monthly, October 1994: http://bit.ly/oXYXGL

PBS Interview with (Nobel prize-winning economist) Joseph Stiglitz: http://to.pbs.org/oQp097

The Long Demise of Glass-Steagall - chronology at PBS.org http://to.pbs.org/qVVIUr

Recipe for Disaster: The Formula That Killed Wall Street: (Feb. 2009) http://bit.ly/osUqat

Infectious Greed: How Deceit and Risk Corrupted the Financial Markets (published 2003) by Frank Partnoy, San Diego University law professor and former derivatives trader - especially chapter on derivatives lobby. Amazon excerpts: http://amzn.to/nlROtW

Trillion-Dollar Meltdown (published early 2008), by Charles Smith, financial reporter. Amazon excerpts: http://amzn.to/nimaMB

A Demon of our Own Design: Markets, Hedge Funds, and the Perils of Financial Innovation (by Richard Bookstaber, former chief risk officer for major investment banks, currently employed by SEC--published April 2007)

"While it is not strictly true that I cause the two great financial crises of the late twentieth century--the 1987 stock market crash and the Long-Term Capital Management (LTCM) hedge fund debacle 11 years later--let's just say I was in the vicinity. If Wall Street is the economy's powerhouse, I was definitely one of the guys fiddling with the controls. My actions seemed insignificant at the time, and certainly the consequences were unintended. You don't deliberately obliterate hundreds of billions of dollars of investor money. And that is at the heart of this book--it is going to happen again. The financial markets that we have constructed are now so complex, and the speed of transactions so fast, that apparently isolated actions and even minor events can have catastrophic consequences."

The End by Michael Lewis, Nov. 11, 2008, Portfolio.com: http://bit.ly/qshpGa

Warren Buffet's 2002 letter to Berkshire Hathaway shareholders where he describes derivatives on page 15 as “financial weapons of mass destruction.” http://bit.ly/r43dnM

Excerpt: Charlie and I believe Berkshire should be a fortress of financial strength – for the sake of our owners, creditors, policyholders and employees. We try to be alert to any sort of megacatastrophe risk, and that posture may make us unduly apprehensive about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal.

Testimony of Eric Dinallo, former insurance regulator in New York State, before the Financial Crisis Inquiry Commission. (2010) - http://bit.ly/JtxdyX

His testimony makes it clear that AIG's Financial Products division in London, which caused the collapse of AIG and led to a huge government bailout, would not have existed under the original Glass-Steagall law. He also explains the dangers of credit default swaps, and explains how state and federal governments chose not to regulate them in 2000.

Wikipedia article on Derivatives: http://bit.ly/p7Lt0g

Bank of International Settlements Dec 2010 chart on OTC derivatives: http://bit.ly/rqTFzT

Senate Investigative Committee 300 page report (April 2011): http://1.usa.gov/nKfFoB

Financial Crisis Inquiry Commission report: http://1.usa.gov/oOes0c

All the Devils are Here: The Hidden History of the Financial Crisis (by Joe Nocera and Bethany McLean). Excerpts from Amazon:http://amzn.to/nuNJtl

Reckless Endangerment (2011): Amazon excerpts: http://amzn.to/mTFKci

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown (Simon Johnson)

Fools Gold (by Gillian Tett, reporter for the Financial Times)

Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System--And Themselves (by Andrew Sorkin): Amazon highlights: http://amzn.to/mRjFrz

Traders, Guns, and Money (by Satyajit Das, expert in derivatives)

Crisis Economics: A Crash Course in the Future of Finance by Nouriel Roubini and Stephen Mihm (2010). Amazon highlights: http://amzn.to/nL2TFh

Wikipedia article about the Glass-Stegall act, the Banking Act of 1933. http://bit.ly/qwv1yQ

Financial Services Modernization act of 1999. http://bit.ly/oWVKn2

The Big Short: Inside the Doomsday Machine: by Michael Lewis. Amazon highlights: http://amzn.to/oJuaD2

Why Isn't Wall Street in Jail? by Matt Taibbi, Rolling Stone Magazine: http://bit.ly/nk0PlL

Blog post (Sept 2009): "Financial Crisis Stems From Lack of Trust:" http://bit.ly/nBjTHM

Algorithms Take Control of Wall Street: Wired Magazine (Dec 2010): http://bit.ly/mUw7YN

Fed made $9 trillion in emergency overnight loans: CNNMoney.com (Dec 2010): http://cnnmon.ie/onA8N0

BOOKS ABOUT CORRUPTION IN POLITICS

Republic, Lost: How Money Corrupts Congress and a Plan to Stop It by Lawrence Lessig. http://amzn.to/IbaKyL

Throw Them All Out by Peter Schweitzer. http://amzn.to/HLOVu8

Griftopia: A Story of Bankers, Politicians, and the Most Audacious Power Grab in American History by Matt Taibbi (2011) - Amazon highlights: http://amzn.to/nIHaWr

VIDEOS

PBS Frontline documentary “The Warning," about how former CFTC chair Brooksly Born raised a warning voice about derivatives regulation in 1999 but was pushed aside by the powers-that-be: http://to.pbs.org/pNlKGg

Inside Job documentary: http://bit.ly/qnzbIe
Who Killed Glass-Steagall?, 10 minute YouTube video: http://bit.ly/nEv6ZL

YouTube animation explaining CDOs, sub-prime mortgages, and the credit crisis (11 minutes) http://www.youtube.com/watch?v=qqUGoVez8xg

Dylan Ratigan rant on MSNBC, August 2011: (5 minutes) http://bit.ly/nwsNck

BOOKS TO BE REVIEWED -- NOT RECOMMENDED YET

Confidence Men: Wall Street, Washington, and the Education of a President by Ron Suskin and James Lurie (2011)

ECONned: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism (by Yves Smith)

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence G. McDonald and Patrick Robinson (2010) - http://amzn.to/JOWN17

Chasing Goldman Sachs: How the Masters of the Universe Melted Wall Street Down...And Why They'll Take Us to the Brink Again by Suzanne McGee (2011) - http://amzn.to/JEtihY

Derivatives The Wild Beast of Finance: A Path to Effective Globalisation by Alfred Steinherr (2000) - http://amzn.to/Jn7Ee8

Greenspan's Bubbles: The Age of Ignorance at the Federal Reserve by William Fleckenstein & Frederick Sheehan (2008) - http://amzn.to/KxY5JE

The Panic of 1907: Lessons Learned from the Market's Perfect Storm

SEC vs. Goldman Sachs (explained at Stanford Law School): http://bit.ly/n1lyaS

The Origin of Financial Crises (Vintage)

The Time Magazine Cover of Greenspan, Summers and Rubin was from February 1999; the Ben Bernanke Cover was from Dec 2009 (see below)

See Financial Crisis Reading List at www.switchyourbank.orghttp://goo.gl/qqysU

See Financial Crisis Timeline at http://www.twas.co/topics/financialcrisis
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