Posted by: Dirk | April 16, 2010

(Book review) It takes a pillage – behind the bailouts, bonuses, and backroom deals from Washington to Wall Street

Nomi Prins, former managing director of Goldman Sachs, provides us with an insider’s view of the financial crisis years 2007-2009. She focuses on the US financial system and the way the bail-out helped it to avert the consequences of its wrongdoings. The book’s main line is that Wall Street firms have only survived by taking substantial government help, which she documents on her website. She concludes that the market is not free, in the sense that the public has taken over a substantial share of risk which not much room for an upside. Prins is a little bit sloppy with her use of language regarding bail-out loans, since these might be paid back in full. They are not always thrown into the mouth of greedy banks. Keeping this in mind, however, the message of the book is in no way affected.

Prins retells the government and Fed reaction to the financial problems of Wall Street firms, going through the moves in detail. This is a very useful account for those that have not read the right newspaper(s) during that time and aggregates relevant information, revealing all sources along the way. She blames the rules and regulations for the problems, while pointing out that Wall Street and politicians conspired to water down existing rules and open up the road that led to more risk and finally the financial crisis.

The book addresses the general public, but economists would gain a lot of insights as well, since the inner workings of the financial sector are important for monetary policy, among other things. More generally, it is hard to argue that our economy relies on free markets, when some sectors are heavily subsidized while others are not. It reminds me of J.K. Galbraith’s article “The renaming of the system“, in which he argues that we should talk about capitalism, not market economy.

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Responses

  1. Excellent review. Thank you. Simon


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