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The Road to Financial Reformation: Warnings, Consequences, Reforms

The Road to Financial Reformation: Warnings, Consequences, Reforms

Henry Kaufman, Niall Ferguson (Foreword by)

ISBN: 978-0-470-53994-1

Jul 2009

288 pages

$19.99

Description

Our financial crisis: what happened, how we got here, and what needs to be done

Henry Kaufman-an esteemed economist and statesman-is one of the most preeminent financial figures of the day, with a history of success from the 1980s, when his firm, Salomon Brothers, ruled the bond markets.

In The Road to Financial Reformation, Dr. Kaufman, who has spent a lifetime entrenched in the world of finance, provides an insightful account of the history and impact of post-World War II financial markets on the economy-what happened, how we got to where we are today, and what needs to be done. Drawing on his vast breadth of knowledge and experience, Kaufman reveals the mistakes that got us into this debacle, the consequences-as they have not been fully realized-and how to put our derailed economy back on track. This book details Dr. Kaufman's warnings and concerns expressed repeatedly throughout the last quarter century, and shows that what he predicted came to pass.

  • Provides an insightful account of the history and impact of post-World War II financial markets on the economy
  • Explores the erosion of credit ratings on corporate debt in the late 1980s and the rapid increase in financial concentration of institutions
  • Discusses the blinding faith in models that rely on historical data but fail to take into account economic and financial market structural changes

With his breadth of knowledge and experience, Kaufman details that this crisis was foreseeable (he saw it coming), and how we created this history-making financial crisis. He also explains the consequences still to come, and presents solutions on how we can recover and reform the markets.

Foreword by Niall Ferguson.

Acknowledgments.

Introduction.

PART I: IN PERSPECTIVE.

1 Past Blunders and Future Choices.

2 Reflections on Business, the Lessons of History, and Globalization.

3 If Adam Smith Were Alive Today.

PART II: NEGLECTED EARLY WARNINGS.

4 Troubling Trends in Financial Markets and Official Policies.

5 Debt: The Threat to Economic and Financial Stability.

6 The Decapitalization of American Corporations.

7 Shortcomings in Financial Oversight.

PART III: THE BIGNESS DILEMMA.

8 From Financial Segmentation to Concentration.

9 Financial Concentration in Economic Thought.

10 Do We Still Need Glass-Steagall?

11 Banking and Commerce Should Not Merge.

PART IV: FINANCIAL CRISES.

12 Postwar Financial Crises, 1966–2001.

13 The Great Financial Crisis of 2007–2009.

PART V: POLICY FAILURES AND REFORMS.

14 Public Policy and the Markets.

15 The Perils of Monetary Gradualism.

16 The Fed and the Governance of Financial Institutions.

17 Transparency and the Fed.

PART VI: PROSPECTS.

18 Prospects for Interest Rates.

19 The Financial Consequences of the Credit Crisis.

Selected Bibliography.

About the Author.

Index.

"OF THE torrent of books being spewed out on the global financial crisis, most fall into one of two categories: the microscopic exploration of a particular episode or scandal, such as the fall of Bear Stearns, or the sweeping attempt to map the meltdown’s moving parts and put it all in an historical context. Henry Kaufman is well placed to deliver the latter, having earned the nickname "Dr Doom"—for his warnings about the dangers of debt bubbles—back in the days when today’s doomster-in-chief, New York University’s Nouriel Roubini, was still in short trousers. His book is an accessible exposition of the causes and consequences of the market trauma . . . Mr Kaufman ruthlessly dissects the past quarter of a century’s financial deregulation. . . He showers his argument with supporting facts and figures. . . A deep thinker on the workings of markets . . ."
—The Economist

"A good read -- and a thought-provoking one."
—Financial World

"Wisdom for a punch-drunk Wall Street. . . gives the lie to the notion that no one saw the financial crisis coming. [Kaufman] was not alone, but was earlier than most. . . In his latest book, Kaufman once again aligns himself with those who believe that a vital task of the central bank is to take away the punchbowl just as the party gets going. Kaufman’s prejudices are well grounded. . . His central insight about banking is old, simple, but profound. . . The occupational hazard of being a financial prophet is that it is impossible to forecast exactly when a bubble will burst. This means that hard-nosed market practitioners tend to discount early warnings. What a shame that Dick Fuld, chief executive of the ill-fated Lehman Brothers, on whose board Kaufman sat, failed to heed the warnings of this remarkable economic sage."
—Financial Times

"Provides an insightful account of the history and impact of post-World War II financial markets on the economy-what happened, how we got to where we are today, and what needs to be done. Drawing on his vast breadth of knowledge and experience, Kaufman reveals the mistakes that got us into this debacle, the consequences-as they have not been fully realized-and how to put our derailed economy back on track. This book details Dr. Kaufman’s warnings and concerns expressed repeatedly throughout the last quarter century, and shows that what he predicted came to pass. . . Provides an insightful account of the history and impact of post-World War II financial markets on the economy. Explores the erosion of credit ratings on corporate debt in the late 1980s and the rapid increase in financial concentration of institutions. Discusses the blinding faith in models that rely on historical data but fail to take into account economic and financial market structural changes. With his breadth of knowledge and experience, Kaufman details that this crisis was foreseeable (he saw it coming), and how we created this history-making financial crisis. He also explains the consequences still to come, and presents solutions on how we can recover and reform the markets."
—The Financial Regulation Forum

"THE ORIGINAL DOCTOR DOOM IS BACK, with some fresh warnings. Henry Kaufman, famous for his bearish views in the 1970s and '80s, now takes up the financial crisis of the past year and urges major reforms. . . chock full of ideas and insightful analysis. . . belongs on the bookshelf of every serious participant in finance and economics."
—Barron’s

"For those interested in why Wall Street imploded and what needs to be done to prevent this in the future will find this book thought provoking. . . provides ideas for potential business opportunities."
—The Bulletin

“If only we had heeded the other Dr. Doom, Henry Kaufman. Bear Stearns Cos. might still be standing. Americans wouldn’t have run up some $34 trillion in domestic nonfinancial debt. And Ben Bernanke could have kept his dollar-spewing helicopter in the hangar. . . Nobody listens to Cassandra, of course, and everybody hates hearing “I told you so” . . . Yet Kaufman’s insider status is the very reason why you should read this book. Here is a withering critique of the follies of deregulation from one of Wall Street’s own. . . Books on financial regulation are by definition dry . . . If the prose gets you down, flip to the telling tables and charts. My favorite is Exhibit 12.1, which lists 15 major credit crises since 1945, starting with a credit crunch in 1966 and running through the various bank failures, crashes, bailouts and bubbles that led inexorably to our own mess. Keep that timeline handy for the next banker, senator or Fed governor who says the financial sector doesn’t need re- regulation. “
— Bloomberg

“A . . . Cassandra of the credit crunch, Henry Kaufman—whose constant warnings about debt bubbles earned him the nickname “Dr Doom”—spends 260 pages relishing reminding us how he told us so.”
—The Economist Online