The Financial Crisis: Who is to Blame?
September 2010, Polity
A huge number of suspects have been identified, from greedy investment bankers, through feckless borrowers, dilatory regulators and myopic central bankers to violent video games and high levels of testosterone among the denizens of trading floors. There is not even agreement on whether the crisis shows a need for more government intervention in markets, or less: some maintain that government encouragement of home ownership lay at the heart of the problem in the US, in particular.
In The Financial Crisis Howard Davies charts a course through these arguments, and the evidence advanced for each of them. The reader can thereby assess the weight to be attached to each, and the likely effectiveness of the remedies under development.
A - The Big Picture.
1 Frankenstein's monster: The end of Laissez-faire capitalism.
2 The rich get richer - the poor borrow.
3 The savings glut - global imbalances.
4 Too loose for too long - US monetary policy.
B - The Trigger.
5 Minsky's Moment.
6 The sub-prime collapse - a failure of government?
C - The Failures of Regulation.
7 A capital shortage.
9 The Canary in the Coal Mine: off-balance sheet vehicles.
10 The taxi at the station: liquidity.
11 The Blind Mind and The Elephant: US Regulation.
12 SEC- RIP?
13 Financial Weapons of Mass Destruction: Derivatives.
14 Federal Mortgage Regulation.
15 Casino banking : the end of the Glass-Steagall Act.
16 Too big to fail.
17 Lighting the Touchpaper: Light touch regulation.
18 There were three people in the marriage: UK regulation.
19 Lack of Coordination.
20 Paradise lost: offshore centres.
D - Accountants, auditors and rating agencies.
21 Shoot the Messenger: fair value accounting.
22 Tunnel Vision: the auditors.
23 Conflicts of interest: credit rating agencies.
E - Financial Firms and Markets.
24 Breaking the chain: originate to distribute.
25 Too complex to trade: derivatives.
26 Disaster Myopia: risk management.
27 The Roach Motel: corporate governance.
28 Blankfein's bonus: pay and incentives.
29 The Vampire Squid.
30 A plague of locusts: hedge funds.
31 Short Selling.
F - Economics and Finance Theory.
32 The death of economics.
33 Inefficient markets.
34 An ethics-free zone: business schools.
G - Wild Cards.
35 The watchdog didn't bark: the media.
36 Greed is bad.
37 Lara Croft: video games.
39 A combustible mixture.
"In this eminently readable account of the current crisis, Howard Davies writes with a wealth of experience."
"Financial crisis is a many-headed hydra and unravelling its causes a Herculean task. In The Financial Crisis: Who is to Blame?, Howard Davies makes significant progress."
Times Higher Education
"An admirable summary of issues for normal people who have a life outside finance."
"Davies' expertise and nuance regarding the crisis shines through and provides a fascinating account of a situation we shall hopefully never see again."
"An excellent primer."
"It's hard to think of anyone better qualified than Howard Davies to evaluate the competing arguments about what caused the worst financial crisis and recession since the 1930s."
Robert Peston, Business Editor for BBC News
"Davies offers the most comprehensive post-mortem yet of the Great Crisis -- essential reading for those who are trying to fix a still precarious post-crisis world."
Stephen S. Roach, Chairman of Morgan Stanley Asia
"Howard Davies' lucid and panoramic account of the financial crisis and the reasons for it is crisply and entertainingly written. It is a great primer for anyone hoping to understand how a complex set of causes united to lead to the near-collapse of global finance in 2008."
John Gapper, Associate Editor and Chief Business Commentator, Financial Times