Too Big to Save? How to Fix the U.S. Financial System
Industry luminary Robert Pozen offers his insights on the future of U.S. finance
The recent credit crisis and the resulting bailout program are unprecedented events in the financial industry. While it's important to understand what got us here, it's even more important to consider how we should get out. While there is little question that immediate action was required to stabilize the situation, it is now time to look for a long-term plan to reform the United States financial industry.
That is where Bob Pozen comes in. Perhaps more than anyone in
the industry, Pozen commands the respect and attention of the
public and private sector. In this timely guide, he outlines his
vision for the new financial future and provides actionable advice
along the way. To Pozen, there are four high-priority problems that
must be addressed, and this book puts them in perspective
- Analyzes alternative models for government stakes in banks
- Recommends a new board structure for large financial institutions
- Examines the importance of broader Fed jurisdiction over systemic risks
- Proposes a way to revive the securitization of loans
With Too Big to Save, you'll learn the likely future of the finance industry and understand why changes have to be made.
The Financial Crisis: A Parable.
Part I: The United States Housing Slump and the Global Financial Crisis.
Chapter 1 The Rise and Fall of U.S. Housing Prices.
Chapter 2 Fannie and Freddie.
Chapter 3 Mortgage Securitization in the Private Sector.
Chapter 4 Credit Default Swaps and Mathematical Models.
Part II: Impact on Stock and Bond Markets.
Chapter 5 Short Selling, Hedge Funds and Leverage.
Chapter 6 Capital Requirements at Brokers and Banks.
Chapter 7 Impact on Short-Term Lending.
Chapter 8 Insuring Deposits and Money Market Funds.
Part III: Evaluating the Bailout Act of 2008.
Chapter 9 Why and How Treasury Recapitalized So Many Banks.
Chapter 10 Increasing Lending Volumes and Removing Toxic Assets.
Chapter 11 Limiting Executive Compensation and Improving Boards of Directors.
Chapter 12 Were Accounting Rules an Important Factor Contributing to the Financial Crisis?
Part IV: The Future of the American Financial System.
Chapter 13 The International Implications of the Financial Crisis for the United States.
Chapter 14 The New Structure of U.S. Financial Regulation.
About the Author.
—Tyler Cowen/ September 2009, http://www.marginalrevolution.com
"Should be required reading on Capitol Hill."
—Kevin Hall, McClatchy Newspapers
"Pozen’s book offers significantly more than a factual
recitation of events leading up to and during the credit crisis.
Beyond that, it offers a comprehensive framework for analysis and
concrete proposals for appropriate regulatory responses. Broadly,
Pozen’s aim is not – or not only – to tell the
story of the crisis, but rather to analyze how the crisis can
illuminate and inform the appropriate relationship between
government and financial markets. Pozen describes specific
regulatory innovations intended to keep pace with the speed and
complexity of financial innovation. He offers, that is, the
analysis sorely lacking in more journalistic accounts of the
crisis. In that regard, his book is one of the few in the growing
literature arising out of the crisis that should inform any serious
discussion of new financial regulation."
—Alisa Greenstein, The Hedge Fund Law Report, October 2009
"Pozen seems to be right (or at least in broad agreement with
me) the overwhelming majority of the time. And as you can also see,
he makes a lot of recommendations, on everything from
accounting standards to insurance regulation. Tyler Cowen is quite
right to give the book a rave review."
—Felix Salmon, blogs.reuters.com/felix-salmon, November 2009
"This is a book for investors who want to understand the details of our financial landscape, and who also want to consider arguments on restricting mortgage-lending practices, whether financial derivatives and hedge funds should be regulated or the revival of loan securitization, among others." (SmartMoney, November 2009)
“There has not been a more timely and important book
written this decade. … In summary, Too Big to Save is
comprehensive, rigorous, and descriptive as well as prescriptive.
The US economy is too important a global player to be ignored, and
Pozen’s analysis in ‘Too Big Too Save’ is too
important to not be read. This book is truly a gem and a strongly
—Sean Cameron, The Harvard Law School Forum on Corporate Governance and Financial Regulation ( http://blogs.law.harvard.edu/corpgov , November 2009
“The best finance book I've read so far this year (and I've read a slew of them) is Robert C. Pozen's Too Big to Save? How to Fix the U.S. Financial System. … I can't think of anybody who has covered such a range of issues so efficiently or so well.” (Brad DeLong, ( http://delong.typepad.com, November 2009
"TOO BIG TO SAVE? asks and answers the questions
weighing on every American's mind...a highly readable and
well-paced narrative...a valuable guide to a wide audience of
readers, from American voters who felt disenfranchised by the
events of September 2008 and are looking for an accessible resource
to further inform their perspective, to professionals who seek a
single source for an engaging account of the crisis and its
implications for businesses today and tomorrow."
—Elizabeth Leonard, Forbes.com, December 2009
"University economists are already teaching courses on the
history of the financial crisis of 2008 and the policy responses
that followed. Robert Pozen's new book could become required
—Ross Kerber, Reuters, December 2009
"To command the weary reviewer’s attention, any new book
on the aberrations of the financial community has to have a clear
focus and make a compelling case. In Too Big To Save? Robert
Pozen, chairman of mutual fund group MFS Investment Management and
a former vice-chairman of Fidelity Investments, pulls off the
trick. … The story of excessive risk-taking and leverage is
lucidly told and accessible to the layman, with good explanations
of securitisation, toxic structured products and the global
dimension of the crisis. The policy recommendations are thoughtful
and mostly full of good sense."
— John Plender, Financial Times, February 2010
"The first thing one can see from the book is how much of a
genius Robert Pozen is. He has a clear grasp on many complex issues
facing the US and world economy. Too Big to Save? is
probably the best book about financial reform written so
—Jacob Wolinksy, GuruFocus.com, February 2010
"... thorough, intelligent and straightforward ..."
—Jim McTague, Barron's, March 2010
"While there are many books on the financial crisis, too many of
them say too much about what went wrong and not enough about how to
fix the problem. Bob Pozen's book Too Big to
Save? (Wiley, 2009) breaks the mold. It not only analyzes
the causes of the crisis with uncommon clarity, but also supplies a
compelling road map for reform."
—Stephen J. Hadley, Harvard Business Review, March 2010
"If you’re only going to read one book on the financial
crisis, this should be the one."
— Matthew Rees, The American, May 2010
Today's debate about the financial crisis has resulted in too much finger pointing and not enough solutions. At last there is a book that moves beyond the blame game to propose an action plan to fix the current mess and prevent another in the future: TOO BIG TO SAVE?: How to Fix the U.S. Financial System (Wiley; November 2009; $29.95) by Robert Pozen. Richard Posner calls is "a detailed yet thoroughly lucid and accessible study of the financial crisis... and more important, the best critique I have seen of the government’s responses to the crisis and its recent blueprint for financial regulatory reform.”
Widely recognized for his leadership in both finance and economic policy, Robert Pozen takes federal policymakers to task for spending huge sums of money with too few benefits for America's taxpayers. Instead, he urges our government to rein in its bailouts, stop buying toxic assets, and provide more incentives for the private sector to regulate itself. Pozen argues that:
- The key to our economy’s recovery is the revival of loan securitization
- Broad-based legislative restrictions on executive compensation tend to backfire
- Fair value accounting did not cause the financial crisis and should mostly be retained
- International cooperation won’t do much to prevent future financial crises
- Regulatory gaps should be closed without creating omnibus agencies
Within a sweeping analysis, TOO BIG TO SAVE? chronicles the collapse of our financial system, one domino at a time from mortgage-backed securities to stock markets, from money market funds to recapitalized banks, and from the SEC's mistakes to international protectionism. Pozen then suggests how the securitization process should be reformed, assesses the impact of the financial crisis on the stock and bond markets, and evaluates the federal bailout of financial institutions by buying their stock and toxic assets. He shows how these bailouts constitute “one-way capitalism” whereby taxpayers bear most of the losses but receive few gains.
Shifting the focus from yesterday's mistakes to realistic solutions that the U.S. Treasury, Congress, the G20, and America’s business leaders can and should take now, TOO BIG TO SAVE? points the way to a more secure economic future by drawing a blueprint for reform.
“When Bob Pozen talks, people listen—with good reason. This book is full of wisdom about the flaws in our financial system that let the crisis develop and, more important, detailed prescriptions for fixing it. Read it. Then keep it on your desk as a reference.”
— Alan S. Blinder, Former Vice Chairman, Federal Reserve Board, Gordon S. Rentschler