July 19, 2017

Books to Understand Financial Capitalism Since the Crisis

These are the most important books to understand financial capitalism, as we look back on the 2008 Financial Crisis. The list is in descending order.

6. Fault Lines: How Hidden Fractures Still Threaten the World Economy

While Rajan is clearly pro-capitalist (he was also the former chief economist of the IMF), Fault Lines nevertheless outlines the systemic reasons for the global financial crisis that hit the end of the aughts. Surprisingly, he identifies economic inequality as the primer driver of economic collapse. Rajan outlines such societal changes as a disappearing social net, the increasing availability of cheap credit to America’s poor, and disparities in education, as the fault lines in . What’s more, he warns that despite the market crash and big bank bailout, unless and until these ‘fault lines’ are addressed, that crisis and ones like it will only ever recur. Of all the books to understand financial capitalism, this is our #6 favorite.

5. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System--and Themselves

This book is one of the most accessible on the list, and a great place to receive a nice primer on the big drivers of the financial crisis. Sorkin lays out the meaning of fraudulent mortgage lending, deregulation, and the mechanics behind investment banking. The book manages to explain these topics in a very readable way, outlining in painstaking detail how these practices and the selfishness of the global capitalist elite in engineering the financial crisis’ destructive impact on the lives of … well … everybody else. You’ll get vindictive pleasure of Sorkin’s descriptions of the bankers freak outs, particularly when they realize that they lose their jobs or even their firms. At times he’s a little too understanding, but overall you’ll be able to garner a much deeper understanding of how the banks and the government together failed the country. Of all the books to understand financial capitalism, this is #5 in our view.

4. All the Devils Are Here: The Hidden History of the Financial Crisis

So who were the devils that helped craft the financial crisis? McLean and Nocera introduce you to some of the key players from this time, many of whom didn’t make the headlines and who were able to evade public scrutiny. Consider Angelo Mozilo, the CEO of Countrywide, who used subprime lending to sell mortagages that he knew would fail. Or Franklin Raines of Fannie Mae, who worked hard to deregulate the loan process. Interestingly, All the Devils Are Here pays particular attention to the myths of the American Dream, which they argue provided a convenient vehicle for the criminal activity that would ensue. Central to the American Dream is the idea that every American can grow up and own their own home, a fact that, ironically enough, the financial crisis helped to make impossible. Yet, free market capitalist ideology and bootstrap thinking was key in many of the major players’ decisions. This book is not one to miss. Of all the books to understand financial capitalism, this is our #4.

3. Crony Capitalism in America: 2008-2012

What’s crony capitalism, and how is it central to big banks? If you’re interested in this question, Lewis’ book is an amazing resource. Crony Capitalism goes into the sickening depths of the corruption in the American financial system, and surprise (or not): it’s worse than you think. Of course, many of us know that there are deep ties between finance and government, especially federal government. Ex-bank CEOs suddenly getting cushy jobs with the Financial Reserve or in the Presidential cabinet is no longer any surprise. But the degree to which these relationships have shaped policy, the tax code, and bank regulation is something few truly understand. This book majorly helps in such an introduction. Of all the books to understand financial capitalism, this is our #3 in our personal opinion.

2. And Then the Roof Caved In: How Wall Street's Greed and Stupidity Brought Capitalism to Its Knees

This book is amongst the shortest on the list, clocking in at 216 pages, so it’s perfect for those that want a more brief overview of the events leading up to the crisis. Interestingly, Faber connects the terror attacks of 9/11 to the unprecedented push by regulators to revive the economy. Due to its brevity, Faber makes his language very simple and easily accessible to the everyday reader. Of the many books to understand financial capitalism, we think this is second best.

1. Age of Greed: The Triumph of Finance and the Decline of America, 1970 to the Present

Age of Greed takes the reader back — way back, to the 1970s, and the cultural and economic shifts that took place. The book brings in characters such as economist Milton Friedman, the champion of free market capitalism, as well as CEOs of the banks around this time (he even includes the role of Ronald Reagan). While this book is a bit more technical, it provides a much more expansive understanding of the 2008 crisis due to its larger scope. He even includes the economic crises of times past, such as the ones that occurred in the 1980s. Ultimately, what happened at the end of the aughts isn’t the result of a few decisions spanning months, or even years, but decades. Finally, we think this is the very best of all the books to understand financial capitalism. We hope you find it as useful as we did.

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