Sunday, January 25, 2009

How We Were Ruined & What We Can Do

By Jeff Madrick

The Trillion Dollar Meltdown: Easy Money, High Rollers, and the Great Credit Crash
by Charles R. Morris, PublicAffairs, 194 pp., $22.95

Financial Shock: A 360° Look at the Subprime Mortgage Implosion, and How to Avoid the Next Financial Crisis
by Mark Zandi, FT Press, 270 pp., $24.99

The Reckoning
a series of articles by Gretchen Morgenson et al.
The New York Times, September 28–December 28, 2008

Some prominent figures in the financial markets insist that unchecked opportunism by financiers was not a root cause of the current credit crisis. Robert Rubin, the former Treasury secretary who has just resigned as a high-level adviser and director at Citigroup, told The Wall Street Journal in November that the near collapse of Citigroup, which was bailed out by the federal government, was caused by the "buckling" financial system, and not any mistakes made at his company. "No one anticipated this," said Rubin, who once ran the investment firm Goldman Sachs. Others such as Harvey Golub, former chairman of American Express, maintain that the fault lies principally with the federal government, which since the 1990s and even earlier has been actively promoting mortgages for low-income Americans. This, he argues, led to the unsustainable frenzy of sub-prime mortgages in the 2000s.

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