After the Music Stopped

After the Music Stopped

The Financial Crisis, the Response, and the Work Ahead

Book - 2013
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With bracing clarity, Blinder shows us how the U.S. financial system, which had grown far too complex for its own good-and too unregulated for the public good-experienced a perfect storm beginning in 2007. When America's financial structure crumbled, the damage proved to be not only deep, but wide. It took the crisis for the world to discover, to its horror, just how truly interconnected-and fragile-the global financial system is. The second part of the story explains how American and international government intervention kept us from a total meltdown. Many of the U.S. government's actions, particularly the Fed's, were previously unimaginable. And to an amazing-and certainly misunderstood-extent, they worked. The worst did not happen. Blinder offers clear-eyed answers to the questions still before us, even if some of the choices ahead are as divisive as they are unavoidable. After the Music Stopped is an essential history that we cannot afford to forget, because one thing history teaches is that it will happen here again.
Publisher: New York : Penguin Press, c2013
ISBN: 9781594205309
Branch Call Number: 330 .973 BLI
Characteristics: xix, 476 p. :,ill. ;,25 cm

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baldand
Apr 13, 2016

The strength of the book is in its clear explanations of fairly complicated economic and financial concepts. This is aided by numerous boxes and detailed tables. For example, there is a three-page table showing how the voluminous Dodd-Frank Act dealt with the issues relating to financial regulation. The weaknesses of the book are its extreme Democratic Party partisanship (unindicted war criminal Bill Clinton endorsed it as a masterpiece for a reason), its over-colloquial style for a work of scholarship, and, most damaging, its failure to provide a convincing set of reforms to prevent another financial crisis from happening. With regard to the over-colloquial style, just when an asset bubble burst is a little bit more uncertain than when Wile E. Coyote will start to fall once he runs over a cliff. The punting-the-ball football metaphors to describe officials declining to deal with an issue may puzzle the book’s overseas readers.
There is no recommendation to remove the income tax deduction of mortgage interest payments on mortgages on principal and secondary residences in the US; in fact, the issue isn’t even mentioned. Again, there is no proposal to discourage federal agencies from coercing financial institutions into granting loans to minority households that are poor credit risks, an issue that is only vaguely hinted at. Again no hint that excessive zoning restrictions may have helped create the housing bubble that led to the financial crisis or that this should perhaps be avoided in the future. The Volker rule against proprietary trading is treated with skepticism. Bringing back the Glass-Steagall Act provisions to separate commercial banks from investment banks is frowned on, although the author admits that things might have gone better in the Great Recession if they had still been in place. He is absolutely against breaking up larger banks if they are too big to fail and ignores the clear evidence that the designation of systemically important financial institutions has only encouraged their growth.
Professor Blinder does not want to change the US Fed’s mandate to promote price stability, instead of price stability and full employment. In fact, it seems he would rather add full employment to the European Central Bank’s mandate. Sensibly, he doesn’t want to raise the US Fed’s target rate of inflation, but neither does he want to lower it. In 1980, Professor Blinder wrote a paper critiquing the old net acquisition approach to owner-occupied housing in the US Consumer Price Index. So it was very disappointing to find that changing the US Fed’s dysfunctional target inflation indicator isn’t an issue for him at all. (It is discussed in my paper: “A Better Inflation Indicator: A CPI with a Net Purchases Approach to Owned Accommodation, 2005-2010”.)
He is very good on how the Bush and Obama administrations might have set up a successor to the Depression-era Home Owners’ Loan Corporation to halt mortgage foreclosures during the financial crisis. However, this is the kind of thing a government would contemplate if there is another huge financial crisis. It isn’t a proposal to keep one from happening.

k
kninchicago
Apr 19, 2014

I don't agree with a number of Mr. Blinder's conclusions (he's awfully soft on the Fed and the Clinton administration, but then you read his bio and see why) but the chronology of this book is really super and I did learn a lot. He assumes a basic knowledge of macroeconomics as well as derivatives which might make this book too much for someone without a finance background (if that sounds like you, I highly recommend Matt Taibbi's Griftopia) but I really like how he includes 2006-2012 in this book--so many stop after 2009 or so.

s
StarGladiator
May 28, 2013

[Read a NY Book Review by BLinder where he refers to /// the great Milton Friedman \\\ whom any sane person refers to as a looney tunes!] Cannot state enough that Blinder is a farce, a fraud and a charlatan! His statements on both the Clinton Administration's culpability - - for gosh sakes, he signed the REIT Modernization Act, the Gramm-Leach-Bliley Act and the Commodity Futures Modernization Act laying the groundwork for the global economic meltdown and $23 trillion transfer of wealth to the super-rich - - and the Federal Reserve, which Blinder was a former employee of. No, Blinder was most definitely part of the problem, and as one of the super-crooks, he won't be the one to fully explain it!!! [FYI: Blinder is a member of the international lobbyist group for the super-rich, the Bretton Woods Committee. Also, if still unconvinced, you should research into his Promontory Interfinancial Network.]

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