The 10 books to help you understand the crisis
Cardiff Garcia
05 Jun 2009

Not surprisingly, the number of books about the causes and consequences of the financial crisis has proliferated in recent months. To help our readers keep up, Financial News has compiled the following list of 10 finance books released this year along with brief synopses and links to reviews and excerpts.

In alphabetical order by title:

“Animal Spirits: How Human Psychology Drives the Economy, and Why It Matters for Global Capitalism”, by George Akerlof and Robert Shiller. Drawing on insights from psychology and history, two economists advocate for macroeconomic policies that account for human emotion and irrationality. Reviewed by The Economist:

“Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook
the World Economy” by Barry Ritholtz. Ritholtz, a quantitative researcher who runs one of the best-read finance blogs, The Big Picture, goes after the regulators, politicians and financiers he deems responsible for the crisis. Reviewed by Bloomberg Europe:

“Chasing Alpha: How Reckless Growth and Unchecked Ambition Ruined the City’s Golden Decade”, by Philip Augar. The author’s third installment about London’s City laments the Americanization of finance and the cozy relationship between investment bankers and New Labour politics during the City’s boom years. A Q&A with the author in Financial News:

”Fool’s Gold: How the Bold Dream of a Small Tribe at JP Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe”, by Gillian Tett. The Financial Times journalist traces the roots of the crisis back to the invention of credit derivatives by a small team at JP Morgan. Reviewed by The Independent:

“Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis”, by John Taylor. This short book by the Stanford economics assigns the blame for the crisis to flawed monetary policy by the US Federal Reserve. A review in the Financial Times:

“House of Cards: A Tale of Hubris and Wretched Excess on Wall Street”, by William Cohan. Former investment banker Cohan, who also authored a book about the history of Lazard, chronicles the ten days leading to the collapse of Bear Stearns. Reviewed here by The Washington Post.

“Lecturing Birds on Flying: Can Mathematical Theories Destroy the Financial Markets?” by Pablo Triana, with foreword by Nassim Nicholas Taleb. The author, a former derivatives consultant, takes aim at the quantitative models and financial theory that he deems responsible for some of history’s market failures, including the current one. The book is scheduled to be released June 9, but here is a link to its Amazon page

“Lords of Finance: The Bankers Who Broke the World”, by Liaquat Ahamed. A history book with obvious contemporary parallels, it chronicles how the decisions of the world’s four most powerful central bankers in the aftermath of the first World War laid the foundations for the Great Depression. Reviewed by the New York Times:

“The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street”, by Justin Fox. Populating this story with some the most influential economists and financiers of the twentieth century, the business and economics columnist for Time Magazine describes the rise and fall of the efficient markets hypothesis. Reviewed by Barron’s here

“Street Fighters: The Last 72 Hours of Bear Stearns, the Toughest Firm on Wall Street”,
by Kate Kelly. The reporter for the Wall Street Journal places the demise of Bear in the context of its deserved reputation for toughness and arrogance. An excerpt from the book:

Category: Bailout Nation, Bailouts, Books, Markets

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5 Responses to “The 10 books to help you understand the crisis”

  1. gloppie says:

    I’m re-reading “Infectious Greed” How Deceit and Risk Corrupted the Financial Markets by Frank Partnoy
    and although it was written in 2003, a surprising amount of companies that are part of the recent meltdown are already named. It clearly shows that regulator have been asleep at the wheel for the last decade.
    This book also illustrate how competitive market should really work; you can pick one new for $3.90

    ISBN-13: 978-0805072679

  2. RonSen says:

    Peter Warburton’s “Debt and Delusion”

    Warburton identifies the Federal Reserve’s enthusiasm to create credit bubbles which inevitably lead to diminishing credit quality. Basically Warburton calls the crisis writing in the late 90s with the Fed cooperating as though they intended to make the biggest errors in monetary history.

  3. CPB says:

    Animal spirits is a great book, agree. Since you mention a book on “psychology” in your top 10, why isn’t “Psychology of the Call” not part of your blog roll?

    Great week wished, CPB

  4. Jack McHugh says:

    Bill Fleckenstein’s book, “Greenspan’s Bubbles: The Age of Ignorance at the Fed” should be on this list. The Maestro’s role in this mess needs to be emphasized, since, in addition to foisting upon the markets a dangerously easy monetary policy, he was operating behind the scenes to break down all the regulatory barriers he philosophically opposed. Bringing down Glass-Steagall, outlawing CDS regulation, allowing leverage ratios to climb, letting mortgage origination standards to slip, encouraging subprime lending, letting Fannie and Freddie get way out over their skis, and removing the dentures of as many regulators as possible can all be laid at Sir Alan’s feet. Bill makes an excellent case that Greenspan should be considered public enemy number one when looking for suspects responsible for the financial crisis and the Great Recession.

  5. farmera1 says:

    Greenspan, is public enemy no. 1.

    Read his book, AGE OF TURBULENCE, it gives a clear picture of his “thinking”.
    Published in 2007 just before the wheels fell off, the book leaves no doubt about where he was coming from. And in my mind, his own book fingers him as the central
    player in this great financial train wreck.

    He had spent a great deal of time at the feet of Ayn Rand, the objectivism thinker, that says to me government is bad, when people act without laws the greater good is served etc.

    In his book, Greenspan defends mountains of debt as no problem (all countries do it), unregulated derivatives as a great positive financial innovation, he makes it obvious that he believes unfettered markets will solve all problems.

    He did address one question I had, how did anyone like Greenspan that thought government and regulation were bad, end up running the biggest central planning agency in the world (the FED) since the Kremlin fell. Greenspan’s explanation in his book was that he could do more “good” on the inside than he could on the outside handing out pamphlets. The world would have been much better off if Greenspan hadn’t replaced Volcker as FED chairman.

    If you want to get an understanding of the thinking of the central character in this great tragedy we are in, read Greenspan’s book.