Tomorrow is the official publication date of Bailout Nation. This is the back story to how and why the book came to be.

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Long story short:  After Bill Fleckenstein’s GREENSPAN’S BUBBLES was published, McGraw Hill asked him to do a follow up to that book.

He wisely said no.

However, Bill suggested they contact me.

Which they did. I turned the  publisher down (several times). Who has time to write a book? Besides, I did not want to do a fast, rush-to-judgment type of thing. But they were tenacious in their pursuit, and I eventually succumbed to their flattery — on my terms, however, including having final edit on the manuscript. (This becomes important later on, as you will soon see).

Because of the way events played out, I ended up writing this beast three separate times. Literally:  Bailout Nation was written as 3 complete books over 18 months.

The first version was a history of bailouts. I started playing with the idea of this back in October 2007.  (We were short a lot of financial names then).  By the Summer 2008, I had put together a broad overview covering the early 19th century, the history of the Fed, and a meaty arc from Lockheed (1971) to Bear Stearns (March 2008). It was a fairly pedestrian historical approach.

Around the time it was due (near Labor Day 2008), something funky was in the air . . . you could smell the leading edge of the approaching shitstorm. By the end of August 2008, I convinced the publisher to extend the deadline a few weeks.

Good thing I did . . . Boom! Fannie Mae blew up. Then Freddie Mac, Lehman Brothers, AIG, Citigroup, Bank of America. Soon Merrill was on the ropes, followed by Morgan Stanley, Goldman Sachs, GM and GE. All hell was breaking loose. Well, I thought, at least the book will be more interesting. The expanded version of the manuscript, with greater emphasis on the latter part of 2008, was finished in December ’08.

Or so I thought.

After I handed the book into the publisher (McGraw Hill), they let me know they had problems with my assessment of the Ratings Agencies. They were unhappy with my calling them “Pimps & Hos“, or describing their business model of rating junk bonds as AAA for big fees as “Payola.” (What else would you call it?)

Not coincidentally, McGraw Hill owns of the largest Rating Agencies, Standard & Poor’s.

My compromise was to change the tone — namely, to remove the reference to Pimps. However, in its place I was going to add publicly available data and congressional testimony, more detailed analysis, and quotations from experts. When it was finished, I found the revised section to be less vitriolic — but far more devastating to S&P. They (along with fellow rating agencies Moody’s and Fitch’s) were key enablers to the entire crisis. There were many other guilty parties, but I simply could not under-emphasize the ratings agencies.

When McGH rejected it again, I exercised my right to buy the manuscript back from them in January 2009 (I returned the advance). Numerous publishers were interested, but I went with Wiley — they have a great deal of experience publishing business/investing related books, and as a publisher, had no conflicts of interest that would interfere with telling the full story.

The third version was the charm.

By now, the amount of bailout money going to mismanaged companies, reckless speculators, and incompetent corporate executives had skyrocketed to 14 trillion dollars. This was infuriating to anyone paying attention.

Astonishing things happened as the book progresses. The more I researched and wrote, the more it was apparent we were witnessing the greatest heist ever made. By the last section of the book, history’s biggest transfer of wealth — from the taxpayer to the Banksters — was taking place. Trillions were being shifted from the responsible to the reckless, from the prudent to the incompetent. It was infuriating — and you will see as the book progresses my initial academic tone gets replaced with greater snark and anger.

I not only had my ending, I had a new cause — exposing those who caused this mess, be they Democrat or Republican, Corporate CEO or derivatives trader.

I hope the end result is something that will inform and illuminate, while entertaining you along the way . . .

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Category: Bailout Nation, Bailouts, Books

Please use the comments to demonstrate your own ignorance, unfamiliarity with empirical data and lack of respect for scientific knowledge. Be sure to create straw men and argue against things I have neither said nor implied. If you could repeat previously discredited memes or steer the conversation into irrelevant, off topic discussions, it would be appreciated. Lastly, kindly forgo all civility in your discourse . . . you are, after all, anonymous.

27 Responses to “The Back Story to Bailout Nation”

  1. jpm says:

    Barry,
    I wish you luck with the book sales in general, but I most hope that it sparks a revolution in the way ratings agencies work.
    Hell, I hope the resulting shitstorm puts them out of business.
    The whole reason those guys exist is to prevent crap like this happening, and they proved to be nothing more than a bunch of dishonest clowns.

    Again, good luck,
    JP

  2. call me ahab says:

    BR-

    I know you worked your ass off on this book- but you have got to be ecstatic the way the “planets lined up” as your book progressed- it would be akin to writing a book about steroids in Baseball and as you kept getting nearer to completing your book- another bombshell of a super stud pitcher or slugger using steroids came out-

    talk about free publicity- your timing could not be more perfect

  3. mark mchugh says:

    Here’s the taste I can’t get out of my mouth:

    Are we really going to let McGraw-Hill be allowed to educate our children? Will they publish honest textbooks about the nature of the crisis?

    That said, best wishes on the success of the book; I can’t wait to read it.

  4. mark,

    iffin’ you’re not aware of that ‘shootin match’, see: “…The state board of education selected the history and social studies texts it would buy for its 4.2 million public-school pupils. Because Texas accounts for a hefty 8 percent of America’s $4.5 billion textbook market, whatever flies in the Lone Star State usually lands on desks nationwide. Winning Texas “is the first step to becoming a bestseller,” says Gilbert Sewall, director of the American Textbook Council, a New York-based nonprofit research group. Only California, largest of the 22 “adoption states” (where textbooks are approved on a statewide rather than local basis), spends more, but it doesn’t vote on books for the crucial high school market.

    Reserved Electronic Postings – Follow the Money:
    Publishers say they must protect $3.35 billion in annual U.S. college textbook sales. They do not want to allow professors unfettered “fair use”. Textbook Sales Rise – The higher-education segment of the U.S. book publishing industry had 2005 sales of $3.35 billion, 5.3 percent higher than 2004, the publishers association says. Sales for the entire book publishing industry were $25 billion in 2005, an increase of 9.9 percent…”
    http://www.edu-cyberpg.com/Teachers/textbookcensorship.html for starters, and: http://clusty.com/search?input-form=clusty-simple&v%3Asources=webplus&query=educational+text+book+publishers
    4 further..
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    BR,
    w/this: “..the amount of bailout money going to mismanaged companies, reckless speculators, and incompetent corporate executives had skyrocketed to 14 trillion dollars. This was infuriating to anyone paying attention.

    Astonishing things happened as the book progresses. The more I researched and wrote, the more it was apparent we were witnessing the greatest heist ever made. By the last section of the book, history’s biggest transfer of wealth — from the taxpayer to the Banksters — was taking place. Trillions were being shifted from the responsible to the reckless..”
    I’m glad that you were able to include that facet of these Events. A Wholesale Looting that will be Forever remembered as the greatest Heist in the history of the World. We ‘Cained Peep, so meek, as to be quieted with a simple ~20% tack-on, in devalued ‘dollars’, no less, to our ‘retirement savings’, it should be no wonder why we are no longer Free.

  5. DL says:

    Sooner or later, we’ll have an even bigger financial collapse, because the banksters will take even more risk the next time around (despite new rules intended to thwart such an outcome), and because, by then, debt levels will be even higher.

    Those who fail to learn from history are doomed to repeat it.

  6. ZenProfit says:

    The last chapter was the real killer for me.

    I have ZERO faith that any of the productive suggestions made by you and others will ever see the light of day. I honestly believe that Wa$hington has been bought and paid for and that we are setting up for an entire lost generation (forget decade).

    Of course, if we rev up to go to an expensive ground war against Iran then all will be well again. :-(

  7. Mikey says:

    Barry, I can understand why Treasury Secretary Hank Paulson–who was a former CEO of Goldman Sachs–favored Wall Street, but what is in it for Geithner, Summers, Bernanke, and most importantly, President Obama?

    Is there something ideological going on like what Willem Buiter calls “cognitive regulatory capture,” or more sinister like political control by what Simon Johnson calls the “Wall Street oligarchs?”

    The horizon of Geithner’s stress test was to the end of 2010 [1] but we know that the pay-option ARM reset wave won’t crest until summer 2011–and assuming a 12 month delay, a default wave cresting in summer 2012. Given the paltry capital raising demanded as a result of the stress test, did Geithner assume that the banks get rid of their now-performing-but-post-2010-toxic pay-option ARM whole loans and their derivative RMBSs and CDOs via legacy TALF and PPIP?

    Is this also true for now-interest-only commercial real estate loans, which according to Whitney Tilson have 5 to 10 year reset schedules–meaning a CRE default wave that won’t crest until 2010 to 2015?

    Are taxpayers about to get hosed again?

    Could you talk about all this on your book tour?

    Good luck and will definitely buy your book!

    ———————————-
    [1] See footnote 7 on page 8 of the Fed’s “Supervisory Capital Assessment Program: Overview of Results” (May 7, 2009)

  8. ReductiMat says:

    Barry, when will you be on the TDS? Or will it be Colbert instead?

  9. constantnormal says:

    @DL 3:45p

    “… despite new rules intended to thwart such an outcome…”

    What “new rules”? I have witnessed no efforts to change or constrain the banksters’ behavior …

  10. constantnormal says:

    It perplexes me that we have not seen an avalanche of class action suits against the ratings agencies.

    Perhaps the lazy lawyers have merely been awaiting the publication of Bailout Nation, to make their research a bit easier.

  11. zell says:

    While I enjoyed reading it, the book will be more useful to me in the future when the details become a bit fuzzy and I need a taste of what happened again. I had to laugh when I got to the meager last chapt. because it seems that what was left unsaid is that we’ve been ripped off and don’t have a way out.
    We’re in a lull now, till we’re brought before the Court of Unintended Consequences in the months ahead.
    Hopefully your book tour waits till Sept. when we again have to look into the maw.

  12. usphoenix says:

    MEH: Agree. I’m sure you’re aware of the grand old book “Lies My Teacher Told Me”. Textbook wars and power and control.

    And you are correct. College textbook costs have soared way beyond reason. Probably more like the drug industry than anything except maybe investment banking. They charge exorbitant prices, with professors as willing co-conspirators. Books undergo minor revisions annually to reduce used book resale. Profs just keep raking in their cut. And the publishers spread it around as royalties and honoraria.

    A math textbook, “Real Analysis” by Rudin has been a classic for well over forty or fifty years. No need for revision, will never be surpassed. A small book, maybe 5 by 8 with fewer than 200 pages, now sells for $165.

    At least there is some hope. MIT now makes most of their course notes internet available for free. If you can handle the content, you’re frequently all set.

    Everyone knows about Google and Google Scholar, but how about YouTube? Go to YouTube and search for instructional videos. Voila. E. G., search “PhotoShop Tutorials”. Free. And Wikipedia.

  13. Ned says:

    Just finished the book on the beach today.

    I am not in finance, so I didn’t follow this as closely as many of you did — but a lot of this was new to me. You do a nice job laying out the chronography, then connecting the dots.

    I was informed and entertained.

  14. DL says:

    constantnormal @ 4:46

    No new rules yet. But they’re coming; there’s bipartisan support for such.

    However, the politicians will be like the generals fighting the last war. And I have complete faith that the banksters, together with the financial engineers, will be able to bypass any roadblocks that may be thrown up over the next few years.

  15. ben22 says:

    Barry,

    Isn’t it funny how things seem to “fall into place” for people that work very hard.

    Seems to me that someone like yourself creates your own “luck”

    Congrats on the book. I’m looking forward to reading it though I worry it will only anger me more.

  16. ben22 says:

    Re college textbooks

    One of the greatest rip off’s ever.

    My favorite when I was in school was the prof that made you buy the book they wrote, as required for the class. I took an American History class my freshman year at Penn State. The first day of the class we watched The Wonder Years, the next week, we discussed on the lyrics to Don McLean’s American Pie. The required book, written by the prof was basically a giant rolling stone magazine.

    I also enjoyed the economics textbooks that cost $200 or more but were not going to be used next semester so you couldn’t sell it back to the bookstore as it was then “worthless”. Hell, even the books you could sell back you maybe got 20 – 30 cents on the dollar for the resale of them. I didn’t realize until college that the information in the books could depreciate so much!

  17. snapshot says:

    http://www.washingtonwatch.com/bills/show/111_SN_386.html

    Signed 5-20-09

    Section 5….We can hope can’t we.

  18. Pat G. says:

    My wife would say that the setbacks in its printing were meant to be so that it was published when it was. If you follow… So, how do we go about getting an autographed copy?

  19. ben22 says:

    Pat,

    I think Barry said not too long ago he was going to do book signings so I’m sure he’ll post a schedule when he goes on tour.

  20. a guy called john says:

    No mention of Aaron Task?

  21. Pat G. says:

    @ben22

    Thanks, I must have missed that. I’ll look forward to the schedule.

  22. CaptiousNut says:

    The textbook publishers are very much a co-conspirator of Big Media, Big Business, and Big Education – and therefore aligned with Big Government.

    The same thing happened to John Gatto. A large publisher commissioned him to write a book on *The Underground History of Education* but then ultimately decided not to publish it – saying that his findings would “embarrass friends of the house”.

    http://marginalizingmorons.blogspot.com/2009/02/muzzling-john-gatto.html

    Though, BR, Gatto did the right thing and put his book on the web for FREE!

    http://www.johntaylorgatto.com/chapters/index.htm

    That book fundamentally altered my life. I strongly encourage y’all to read it – though admittedly, the fact that is was censored ought to be a much, much bigger endorsement.

  23. Whammer says:

    Having been out of college for a long time, I am astonished at the current prices folks are mentioning here.

    Back then (late ’70s), you could often buy used textbooks. It’s not like intro courses in physics, math, chemistry, blah blah, change very much……

  24. CaptiousNut,

    good of you to mention JTG. John Taylor Gatto is a Man. And, He Knows.

    LSS: the NEA, and their fellow-tavelers, are Bogus, and we wind up paying for our own Brainwashing..

  25. bitpuddle says:

    Was excited to read this, but I’m a bit disappointed to see that no Kindle version is available.

    Regardless, congratulations on maintaining integrity and getting this published as you wanted it published.

  26. [...] doesn’t go any easier on the ratings agencies, a stance which has caused him some headaches. In a recent blog entry, he wrote that he butted heads significantly with McGraw-Hill, the book’s original publisher and [...]

  27. [...] go any easier on the ratings agencies, a stance which has caused him some headaches. In a recent blog entry, he wrote that he butted heads significantly with McGraw-Hill, the book’s original publisher and [...]