Financial Crisis - resources

Center for Economic and Policy Research . www.cepr.net Economist Dean Baker is a driving force at this Center, which posts many of his articles on the economy. Baker warned of the housing bubble early in the game. For an introduction to Baker and his analysis of the financial crisis, take a listen to Progressive Radio's 3/9/09 interview of Baker via iTunes or at the Progressive Radio link at www.progressive.org.

Dollars & Sense www.dollarsandsense.org Dollars & Sense is a bimonthly magazine out of Boston, and now a website, on the economy from a progressive perspective. They also publish books on the economy. Take a look.

Democracy Now! (Syndicated radio and TV broadcast; podcast) Available through many public and community radio stations, on satellite TV and by podcast at www.democracynow.org or via iTunes. Diligent, serious, rigorous and wide-ranging, Amy Goodman's indispensible daily news program, Democracy Now! is one of the best news sources, if not the best, coming from a progressive perspective. She frequently interviews radical economists and others with a much more clear-eyed assessment of the economy than anything you will hear in "mainstream" media. A few past shows to check out:

* Goodman's 3/23/09 interview with Nobel-prize-winning economist Paul Krugman, "Zombie Ideas Have Won," assessing Secretary of the Treasury Geithner's bank bailout plans.

* Goodman's 3/24/09 interview with Thomas Geoghegan "Infinite Debt: How Unlimited Interest Rates Destroyed the Economy"

* Goodman's 3/26/09 piece "Usury Country: Payday Loans Pushing Millions of Middle Class Americans Deeper into Debt"

* Goodman's 2/13/09 interview of economist Robert Kuttner and Professor Michael Hudson on the Obama administration's stimulus package.

Bill Moyers Journal (PBS syndicated television broadcast; audio podcast) Available at www.pbs.org/moyers/journal or via iTunes. Moyers is one of the more thoughtful interviewers and critics of the status quo on the air, and his program gives enough time to each guest to really explore their insights and experience. The financial crisis and the inequities of our current economic system are a regular focus for Moyers. Take a listen, for example, to:

* Moyers' 10/10/08 interview of financier George Soros, dissecting the causes of the financial meltdown.

* Moyers' 10/24/08 critique of former Fed Chair Alan Greenspan and his interview of progressive economist James K. Galbraith, director of the University of Texas' Inequality Project. Galbraith discusses how the lack of financial regulation made the financial system into a "poisoned well" of mistrust.

The Big Money (website; audio podcast). Available at http://tbm.thebigmoney.com/ or via iTunes. This audio podcast out of Slate.com carries well-informed discussion about what is going on with the economy, the bailout and governmental recovery efforts, often from a critical perspective. The Big Money did a very good in-depth interview, 5/21/09, of Financial Times reporter Gillian Tett, author of Fool's Gold -- How the Bold Dream of a Small Tribe at J. P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe. Tett chronicles the development of the complicated financial derivatives by J.P. Morgan and other firms that helped turn the serious subprime collapse in the U.S. into a global financial catastrophe.

The Big Money also did an intriguing half-hour interview, 8/11/09, with David Wessel, economics editor of The Wall Street Journal, Pulitzer-prize winning journalist, and author of In Fed We Trust: Ben Bernanke's War on the Great Panic. Wessel explains and critiques the short-sightedness of the financial community in betting so much money on the proposition that home prices "would never fall." Wessel notes that Federal Reserve chair Ben Bernanke and former Treasury Secretary Henry Paulson asserted that the subprime crisis would be "contained." But, says Wessel, Bernanke and Paulson "didn't understand how much the housing bubble had infiltrated the entire financial system, and how much the entire world financial system rested on just this wrong assumption that housing prices in the U.S., across the country, would not go down . . . ." >>> More

Bloomberg on the Economy (website; audio podcast). Available through www.bloomberg.com/tvradio/podcast/ or via iTunes. Like The Big Money, but perhaps a little more mainstream, Bloomberg on the Economy is often an important source of breaking news and critical perspectives on the economy. Take a listen to the 6/9/09 Bloomberg podcast interview of Barry Ritholtz, author of Bailout Nation -- a critical look at the bank bailouts.

"Federal Reserve: Same Old Sheriff on Wall Street" a Real News Network video interview, 6/24/09, with Robert Pollin, one of the economists at the Political Economy Research Institute (PERI), here at UMass-Amherst, available at RNN Pollin interview. Pollin criticizes in detail the Obaman administration's proposal to give increased financial regulatory power to the Federal Reserve, an institution that Pollin notes had the power to regulate financial institutions and failed to use it to prevent the financial crisis. He outlines other federal deregulatory moves and regulatory failings that led to the current crisis. Pollin's articles, comments and interviews, along with others of his colleagues on the financial crisis and the promising prospects for a clean-energy-oriented, green economy, can be found at the PERI website, at www.peri.umass.edu.

Plunder and Blunder -- The Rise and Fall of the Bubble Economy, by Dean Baker (2009). Dean Baker is a progressive economist at the Center for Economic and Policy Research (see organizational resource listing above). Baker's book steps back to look at the internet stock bubble and other financial problems of the 1980s and 1990s that in some ways set the stage for the current financial crisis, which he also dissects. In the process, he reviews and criticizes some of the economic policies of the Reagan, Clinton and Bush administrations, along with monetary policy decisions by former Federal Reserve Chair Alan Greenspan. Like other progressive economists, Baker highlights the fall in real wages for many American workers and their turning to increasing debt to maintain their standard of living, and the disproportionate transfer of wealth to the wealthiest Americans, beginning under the Reagan administration. He also suggests that Fed Chair Greenspan's 1998 decision to bail out the hedge fund Long Term Capital Management signalled to Wall Street that risky bets by the biggest players would be covered by the Federal government if they went bad, leading to increased risk-taking in the financial sector and eventually to the crisis we have today.

"Anatomy of a Financial Crisis," Prof. Barry Eichengreen, available through Barry Eichengreen articles page link, at Anatomy of a Financial Crisis. In this September, 2008 article, University of California at Berkeley economics professor Barry Eichengreen outlines the major economic policies of the last thirty years that led to the financial crisis -- including certain financial deregulation and the repeal of the Glass-Steagall Act's separation of investment and commercial banking.

Financial Shock -- A 360 Degree Look at the Subprime Mortgage Implosion and How to Avoid the Next Financial Crisis, by Mark Zandi (2008). Zandi does an early outline of some of the main causes of the financial crisis, writing just before the real plummet in the Fall of 2008. Zandi pins the crisis on a number of factors, including former Fed Chair Alan Greenspan's decision to slash interest rates to try to pump up the ecomy after the bursting of the tech stock bubble and 9/11, the aggressive (and irresponsible) peddling of subprime and adjustable rate mortgages, esoteric new financial securities like collateralized debt obligations, inaction by regulators and overbuilding by housing developers. Zandi's prescription for avoiding the next financial crisis: overhaul the financial regulatory system, among other things, and pay closer attention to speculative bubbles when they begin to emerge -- rather than after they burst.

Chain of Blame -- How Wall Street Caused the Mortgage and Credit Crisis, by Paul Muolo and Mathew Padilla (2008). Chain of Blame takes you deep into the gear works of the subprime meltdown, focusing heavily on the rise and decline of Countrywide Financial, one of the country's largest subprime lenders. Muolo & Padilla explain how the growth of mortgage lending outside the conventionally regulated banking sphere, coupled with Wall Street's growing addiction to high-risk subprime loans it could bundle and repackage into high interest securities, set the stage for the subprime collapse. Muolo edits National Mortgage News and co-authored Inside Job: The Looting of America's Savings and Loans about the earlier savings and loan crisis that pre-figured the current meltdown, and Padilla is a southern California business reporter, so they were both well-positioned to take a hard look at the dangerous lending practices that led us to near-collapse. The glossary at the back explaining arcane financial terms is also a very helpful feature of this book.

Fool's Gold -- How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe, by Gillian Tett (2009). Tett, an award-winning financial journalist on the staff of the Financial Times, walks us through the development of credit derivatives (and even explains what they are!) developed by J.P. Morgan and other investment firms, and shows how these new financial devices helped lead to the current financial crisis. Similar in approach to Chain of Blame, this book takes us down to a player and firm level look at how the current financial crisis came about, but Tett probes the credit derivatives side (including the now notorious "credit default swaps"), rather than the subprime mortgage side of the crisis.

"Agency’s ’04 Rule Let Banks Pile Up New Debt", by Stephen Labaton, New York Times (10/2/08), available at www.nytimes.com/2008/10/03/business/03sec.html?pagewanted=1&_r=1. This is a disturbing account of how, on April 24, 2008, the five largest investment banks talked the federal regulators at the Securities and Exchange Commission (SEC) into changing the "net capital rule" that limited investment bank borrowing. The Times reports: "The five investment banks led the charge [for the rule change], including Goldman Sachs, which was headed by Henry M. Paulson Jr. Two years later, he left to become Treasury secretary." "Over the following months and years, each of the firms would take advantage of the looser rules. At [investment bank] Bear Stearns, the leverage ratio — a measurement of how much the firm was borrowing compared to its total assets — rose sharply, to 33 to 1. In other words, for every dollar in equity [i.e., its own money], it had $33 of debt. The ratios at the other firms also rose significantly", according to the Times article.

(This dangerously high investment bank borrowing would contribute to the later financial crisis, and ultimately lead to arrangements for multi-billion dollar public bailouts for several of the firms that lobbied for this rule change. Within four years, the excessively leveraged Bear Stearns would be near bankruptcy, and the Federal Reserve would step in to broker a takeover of this bank, backed by $29 billion in public funds. Later that year -- 2008 -- Paulson, then Treasury Secretary, would design another multi-billion dollar public bailout package, through the U.S. Treasury, for other private commercial and investment banks, including for his former firm, Goldman Sachs. -- RP)

Page last modified: 8/31/09