[Note: this post offers commentary of some of the notable books listed in my just-previous post. The comments here are an enlarged version of my article, “Crash Course,” that originally appeared in The Weekly Standard, November 18, 2018. This enlargement covers more books and extends my comments. I prepared this review and the previous comprehensive book list as part of a larger retrospective on the financial crisis of 2008 organized by a group of faculty and staff here at the University of Virginia. All opinions expressed in this review are my own.]
The financial crisis of 2008 lurks behind much of how we currently foresee the future. What have we learned from the crisis? What have we fixed? What remains to be done? These are the compelling questions to ask at this, the tenth anniversary of the epicenter of the crisis. One would think that ten years is enough time in which to make sense of what happened and get a grip on its lessons for the future. However, the complexity of the crisis and the decay of memory frustrate such efforts. Despite this, there is no shortage of answers to the three questions. A search at Amazon of “financial crisis of 2008” lists some 800 books. A similar Google search yields about 2.7 million hits. Much of this is crisis porn, aimed to stimulate the emotions: lurid, pandering, hateful, and dripping in schadenfreude or grievance at the outcomes for these and those people. A surprisingly large amount of it comes from the Alt-right or radical left, darkly wrapped in theories of conspiracy, greed, and corruption about the elites, the globalists, the bankers, ethnic groups, Americans, Germans, or others who supposedly caused the crisis or exploited it for their own gain. Such theories dangerously caricature the facts and distract the reader from important insights. Instead, the facts suggest a cascade of events that accumulated into a crisis and numerous contingencies, that but for different circumstances, would have diverted the path of events in a completely different direction. Crisis porn reminds one of Daniel Patrick Moynihan’s law, “You’re entitled to your own opinions, but not to your own facts.” The essential task of anyone who really wants to make sense of the crisis is to get the facts, to locate the signal amidst the overwhelming noise.
One should proceed thoughtfully: your time and patience are precious. Focus on a few books notable for solid substance delivered very artfully. Start with one or more histories of the episode (to tell you what happened), dip into some memoirs (for depth about the incredible dilemmas that decision-makers faced), and then study some critical analyses about causes, consequences, and recommended policies. The literature is growing and changing by the month; what follows is a snapshot of some notable books about the financial crisis of 2008.
The crisis of 2008 was not a single event in one place, but occurred across space and time. Thus, any narrative is bound to get complicated. It was largely a North Atlantic crisis, reverberating between the U.S. and Europe. Moreover, the cycle of contraction began with the bust of the housing bubble in early 2006 and extends with aftershocks to the present. No one book treats the complexity, length, and breadth of the episode with finality. Blending a few histories best serves the serious reader.
The crisis narrative necessarily begins with the boom in house prices. One prophet crying in the wilderness was Robert Shiller. The second edition of his book Irrational Exuberance, published in 2005, highlighted the bubble in house prices and the decline in lending standards. He drew his findings from the authoritative Case-Shiller Home Price Index that he co-developed. Of particular importance for understanding the history of the crisis is Shiller’s definition of a bubble as a “sort of psychological epidemic,” which could also be used to describe the bust that ensued.
The late Edward Gramlich warned in 2007 of the rapid growth and abuse of subprime mortgage finance. His Subprime Mortgages: America’s Latest Boom and Bust is the call to arms about the implications of the house price bubble and bust for the credit markets in the understated prose of the social scientist. Today, one reads Gramlich with the same foreboding as one reads about Sarajevo in 1914: “The bottom line here is straightforward. The recent boom in homeownership has put many families in the position of being able to accumulate greater wealth through their houses. It has also burdened a large number of families…with very high debt loads. Given income instability, it becomes highly likely that at some point these families will suffer a significant income loss and have significant problems making their mortgage payments. …With the collapse of various subprime lenders, one of the nation’s primary goals over the next few years should be the avoidance of a domino effect.” It all came to pass the next year
From there, the reader could turn to the short side of the market for subprime debt, so entertainingly presented in Michael Lewis’s The Big Short: Inside the Doomsday Machine. This book is significant for its insight into the vision and courage of contrary investors. To be “short” was to have sold claims on subprime debt in anticipation of the collapse of that market. Short selling is lonely work because one is betting against the over-optimism of the crowd. The market can stay irrational longer than you can stay solvent. Today, with benefit of hindsight, we see what few saw then: a massive over-pricing of mortgage backed securities. In reflecting on the subprime short-sellers, Lewis concluded, “The people on the short side of the subprime mortgage market had gambled with the odds in their favor. The people on the other side—the entire financial system, essentially—had gambled with the odds against them….the story of the big short could not be simpler.”
Where Shiller, Gramlich, and Lewis go deep into particular antecedents of the financial crisis, Bethany McLean and Joe Nocera go broad. All the Devils are Here: The Hidden History of the Financial Crisis is an excellent survey of the decades-long innovations in government policy and the business behaviors they elicited. The Government Sponsored Entities (GSEs), Fannie Mae and Freddie Mac, receive special attention as promoters of the housing boom and credit expansion that ultimately led to the bust. The narrative of this book ends just before the collapse of Lehman in September 2008, which is fortunate in that it helps to focus the reader on antecedents that in other books are easily eclipsed by the high drama of autumn 2008.
Richly documented from interviews and well-written, Too Big to Fail by Andrew Ross Sorkin gives the best summary of the agonies of business and government leaders at the epicenter of the crisis in 2008. Sorkin sympathizes with those leaders, but finally draws a stern judgment: “To be sure, if the government had stood aside and done nothing as a parade of financial giants filed for bankruptcy, the result would have been a market cataclysm far worse than the one that actually took place. On the other hand, it cannot be denied that federal officials—including Paulson, Bernanke, and Geithner—contributed to the market turmoil through a series of inconsistent decisions. They offered a safety net to Bear Stearns and backstopped Fannie Mae and Freddie Mac but allowed Lehman to fall into Chapter 11, only to rescue AIG soon after. What was the pattern? What were the rules? There didn’t appear to be any, and when investors grew confused—wondering whether a given firm might be saved, allowed to fail, or even nationalized—they not surprisingly began to panic.”
The U.S. markets would not hit bottom until March 2009, when the economy began an anemic recovery. Alan Blinder’s After the Music Stopped, carries the U.S. crisis narrative through to 2012 and is particularly good at summarizing the economic and political consequences. He documents evidence of a considerable economic return from the rescues. Yet after detailing the rise of Occupy Wall Street, the Tea Party, and the Freedom Caucus, Blinder notes ”The stunning combination of policy success and political failure may be the strangest legacy of the financial crisis.”
Meanwhile, as the U.S. started slowly recovering, Europe was heading toward the cliff. Neil Irwin’s The Alchemists: Three Central Bankers and a World on Fire enlarges one’s grasp of the European meltdown and extends the coverage through 2012. This is one of the best treatments of the international dimension of the financial crisis, well documented from field interviews and vividly drafted. The important insight is the extent to which the European crisis was not simply imported from the U.S. Nicholas Sarkozy (among others) seared the U.S. for causing the European crisis. However, as Irwin shows, the depth and duration of the European crisis owed to Europe’s own lax regulation, poor coordination among government agencies, fraudulent reporting, asymmetries in economic performance among members of the Eurozone, and ultimately, the fact that the Eurozone is a currency union, not a fiscal or political union. Technocrats from the European Union, the European Central Bank, and finance ministers of Germany and France managed the crisis. Collectively called the “troika,” they plus central bankers in other countries were the “alchemists,” to whom Irwin refers. Irwin is largely sympathetic to the pressures and dilemmas faced by the modern alchemists—central banks work best as purely independent agencies but too often fall prey to the political interests of their overseers, such as inflating the money supply in advance of elections. The divergent interests of Northern European countries and those in the south strained the independence of the ECB. Irwin criticizes the alchemists’ fears of inflation as deflation was looming and of “moving slowly and timidly.” He concludes, “The central bankers’ judgments were far from perfect, and their mistakes allowing the collapse of Lehman Brothers, endorsing early fiscal austerity in Britain, moving with such hesitation and delay in the face of the Eurozone crisis—will do lasting economic damage.” The Fed launched its program of quantitative easing (arguably the predominant economic stimulus in response to the crisis) in 2008; not until late 2011 did European alchemists commit to stronger collective action to fight the crisis, or until 2012 did Mario Draghi, President of the ECB, declare, “the ECB is ready to do whatever it takes to preserve the euro. And believe me, it will be enough.”
Notable for its synthesis but not for objectivity or nuance is the latest major account of the crisis, Columbia University historian Adam Tooze’s Crashed: How a Decade of Financial Crises Changed the World. One can celebrate the audacity of his narrative of the crash, stretching from the Nixon shock of 1971 through to the administration of Donald Trump in 2017. Where other histories of the crisis seem to stop short, Tooze’s grasps the fact that financial crises easily spread across borders and have long “tails” both after and before. The book is an impressive synthesis of reporting and analysis by others. However, it is not clear what new knowledge Tooze has delivered beyond Neil Irwin’s. Tooze is less persuasive that the financial crisis followed from the collapse of the Bretton Woods system in 1971 or that the financial crisis caused China’s mercantilism or Russia’s incursion into the Ukraine. Tooze colors his narrative with sentiments redolent of an older ideology: capitalism is exploitation, the crisis manifests class conflict in the tottering globalist economy, and corruption and conspiracy among the elites caused the crisis. Crashed is foremost a polemic, never in doubt but only sometimes right.
Modern historians mock memoirs as exercises in self-justification. However, these books lend grounded perspective. It is too easy to lose sight of the motivations, dilemmas, and stresses of real decision-makers when one studies macro-history. I count some 14 memoirs of the crisis period, of which several stand out for notable substance delivered well.
Timothy Geithner’s Stress Test: Reflections on Financial Crises is the best in class for its intellectual insight, style of exposition, humility, and candor—if you can read only one memoir, this is the one to get. Geithner is the most articulate advocate of the controversial view that to prevent another Great Depression, the government first had to rescue distressed institutions, let executives collect their bonuses, and inject billions into financial markets: reform and relief for stricken homeowners and the unemployed would have to come later, after the system was stabilized. Yet ten years later, this priority of rescue over relief still generates more light and heat in coffee shops, cocktail parties, and classrooms than any other aspect of the crisis.
Ben Bernanke’s The Courage to Act: A Memoir of a Crisis and Its Aftermath is also very well written and illuminating. His special contribution is the comparison between the crisis of 2008 and the Great Depression. Bernanke’s insights as a leading authority on the Depression lend intellectual justification to the government’s actions during the crisis. As Fed Chairman during the crisis, he took enormous heat for his innovations in Fed policy. Bush’s Treasury Secretary, Henry Paulson, published On the Brink: Inside the Race to Stop the Collapse of the Global Financial System—this is very plainly his defense of his policies. In it, one encounters Paulson as the dynamic action-hero, an excellent complement to the more reflective Bernanke. At times stubborn and domineering, the book also gives glimpses of a man who was vulnerable and humble. Compared to the books by Geithner and Bernanke, Paulson makes a rather lame case in support of his decision to let Lehman fail and of his hasty preparation of a proposal for the Troubled Asset Relief Act (TARP). Perhaps he decided too much too soon. Historians will judge after the archives open years from now.
As Chairman of the Federal Deposit Insurance Corporation, Sheila Bair opposed the liberal deployment of taxpayer money to rescue the financial system, the pressure of lobbyists to influence the actions of agencies, the bonuses of financial executives, and the general “overreaction.” Her memoir, Bull by the Horns: Fighting to Save Main Street from Wall Street and Wall Street from Itself, distinguishes herself as a thorn in the side of the Fed and Treasury Department and as a champion of “Main Street” over “Wall Street.”
Complementing the perspective of Geithner-Bernanke-Paulson-Bair is Barney Frank’s Frank: A Life in Politics: From the Great Society to Same-Sex Marriage. Some 60 pages of the book are devoted to his reflections on the origins of the crisis and on the passage of the Dodd-Frank Act. Frank’s book gives valuable narratives related to Congressional objections to the rescue of Bear Stearns (he approved), the fraught legislative history of the Troubled Asset Relief Act in September 2008 (he approved), and Dodd-Frank (he liked it enough to put his name on it.) Throughout these narratives, the elephant in the room is the growing polarization in Congress-Frank, being an unapologetic partisan himself, hesitates not to finger conservative Republicans for the Sturm und Drang around these events. Street-tough, candid (to the point of blunt), Frank’s book is laced with witticisms some of which are too colorful to be repeated here. I recommend the book for students interested in public service as a source of insights into the challenges of legislative initiative during a crisis. For instance, in reflecting on passage of the TARP Act, Barney Frank wrote,
“I have not checked public opinion polls before and after March 2009, but I would be surprised if the public confidence in government did not drop at that time. Even though most people do not recall the specifics of this fiasco today, the deep resentment it triggered remains embedded in their minds. I am convinced it is one of the reasons that TARP, which staved off total economic collapse and did not end up costing taxpayers, remains so reviled. Indeed, it is the most wildly unpopular highly successful major program in America’s history.”
The memoirs of two most-senior U.S. leaders are notable for their relative reticence about the financial crisis. George W. Bush’s Decision Points devotes the final chapter of his memoir to the financial crisis of 2008, a depressing valedictory to any leader. Bush delegated crisis response to Secretary Henry Paulson and Fed Chairman Ben Bernanke. This was certainly appropriate, though it lends an air of distance and generality to President Bush’s remarks. One of the brutal epitaphs to the crisis was Bush’s comment that “Wall Street got drunk and we got the hangover.” Dick Cheney’s In My Time: A Personal and Political Memoir devotes 10 pages out of the 526-page text to the financial crisis, which would make it of borderline interest to the student of the crisis. Yet Cheney gives an interesting perspective on the meeting at the White House on September 24, 2008 between the two presidential candidates, John McCain and Barak Obama. McCain seemed unprepared and “added nothing of substance.” Obama was “eloquent” and “carried the authority of all the Democrats in the room.” It seemed to be a fruitless effort to align the two candidates around some kind of unity agenda to fight the crisis.
A new memoir by Paul Volcker with Christine Harper, Keeping At It: The Quest for Sound Money and Good Government, affords a glimpse at the crisis of 2008 from the standpoint of a retired central banker of towering reputation. He affirms that the monetary crown does not rest easy on the brow of a financial leader. As a prominent figure in the Nixon Shock of 1971, the Volcker Shock of 1980, the S&L crisis, and the survivor of an “attempted coup” by Federal Reserve Board Governors in 1986, the 91-year old discusses crisis response with gravitas. Thus, when the Fed funded the takeover of Bear Stearns by JP Morgan in March 2018, Volcker said that it had acted at “the very edge of its lawful and implied powers,” an apparent rebuke of Paulson, Bernanke and Geithner for exceeding the Fed’s mandate. In this memoir, he elaborates that “the Fed should not be looked to as the lender of last resort beyond the banking system.” Instead, he favored the creation of a separate agency to buy assets and recapitalize distressed firms, rather like the Resolution Trust Corporation, created to clean up the S&L crisis. Volcker once derided financial innovation as a contributor to the crisis (he said the ATM was the most useful financial innovation) but gave no further comment here. One hankers for more color, more scoop, and more insight into policies for future crises. He does bless Tim Geithner for his “character and competence,” but has little to say about on his successors, Greenspan and Bernanke. Volcker affirms a commitment both to zero inflation and to the Democratic Party—it would be fascinating to learn how he squares that circle. Volcker’s memoir reads as the Great Man speaks: tersely and without flair. One imagines a cigar in his hand as he dictated into a recorder.
Critics from Asia and the emerging economies are quick to point out that this was a North Atlantic crisis, not a global crisis. Europe has produced at least two compelling memoirs of the financial crisis—one from the UK and the other from Greece—that, despite their disparate contexts, yield similar tensions and settlement of scores. Alistair Darling’s book, Back from the Brink: 1000 Days at Number 11, recounts the experience of Britain’s Chancellor of the Exchequer from 2007 to 2010. He argues that the story is not merely about bankers and the banking crisis, but rather about “a crucial point in history, at a time when the world is still coming to terms with rapid globalization of our economies. We are witnessing a power shift—certainly economic and increasingly political—that will not be reversed and which we in the developed economies have yet fully to appreciate, or even fully understand.” He is candid about the stresses of dealing with the “avalanche” of bad news and of collaborating with monumental personalities such as his prime minister, Gordon Brown (“an often fraught and increasingly difficult relationship”) and Mervyn King, Governor of the Bank of England (“he had very strong and fixed views about the role of a central bank”). Darling concluded, “We didn’t get everything right…but we did chart a way through. The effects could so easily have been far worse. My deepest regret is that, during the 2010 election, the government failed to capitalize on our successful handling of the financial crisis, and for that I accept my share of responsibility.”
Easily the most engaging memoir of the crisis is Adults in the Room: My Battle with the European and American Deep Establishment, by Yanis Varoufakis, Greece’s Minister of Finance for 162 days in 2015. An academic and political outsider, he was appointed by the far left Syriza Party on the strength of his articulate criticisms of the waves of austerity imposed by bailouts from the “troika” in 2010 and 2012. With each new round of bailout money from the IMF and ECB, the troika demanded more budget cuts. He argued that these budget cuts simply accelerated the debt-deflation spiral that was deepening Greece’s humanitarian crisis. The book focuses on his failed negotiations to replace the bailout terms with a new debt reduction scheme. Bargaining from a position of weakness, he ultimately brought Greece to the brink of exit from the European Monetary Union (“Grexit”). At that point, his prime minister, Alexis Tsiprias, dumped him. As a latecomer to the Greek disaster, he is perhaps to be forgiven for understating the extent to which the Greeks were the authors of their own fate: legendary economic inefficiency, endemic corruption, willful book-cooking to under-report the national deficit in 2009 (15.7% of GDP, the highest in the world), and tax evasion that amounted to almost a third of Greece’s budget deficit. The book is loaded with conspiracies in all directions, Manichean outlook, and scorching condemnations of the troika, Angela Merkel, Mario Draghi, the European Union—and of his erstwhile comrades in Syriza. It reads like a thriller and warrants top honors for elegant prose. Once begun, it will be difficult to put down. Read it with ouzo.
These memoirs yield rich insights about the difficulties of mobilizing collective action in a crisis. Solutions to financial crises are not engineering solutions, finely wrought outputs of economic models. Instead, they are bargaining outcomes, in which influence, communication, threats, bluffs, cognitive biases, and risk aversions affect the collective decisions. Compare the narratives of Geithner, Bernanke, Paulson, and Bair at pivotal moments in the crisis. At Lehman weekend, Paulson loudly insisted that no taxpayer money would be used, but Geithner and Bernanke seemed to hesitate. At the bidding to take over Wachovia, Geithner wanted the sale to Citigroup, but Bair and the others backed Wells. And at the bailout of Citigroup in November, Geithner, Bernanke, and Paulson recoiled when Bair proposed to shut down Citi. Notable in the Bernanke-Geithner-Paulson memoirs is the spirit of Henry V: “this band of brothers,” a fraternity that Sheila Bair resented. Yanis Varoufakis wanted to take Greece over the brink to Grexit; his prime minister, Alex Tsipras did not. Alistair Darling and Mervyn King fought over different estimates of growth and stimulus in markets.
Given such drama, it is a wonder that we emerged from the crisis at all. The memoirs show why conspiracy theorists are wide of the mark: the decision-makers were not clones; they differed (often sharply) over policies and procedures; they valued aims of rescue, relief, reform, and recovery differently. And they candidly revealed the high stress associated with their professional burdens.
Histories and memoirs take you only so far. At the end of it all, one hungers for meaning. Why did the crisis happen? What should we do differently hereafter? The serious student of the crisis can consult an immense recent literature of analysis and prescription. Here is where the crisis rubber meets the analytical road. At least four themes stand out to explain the crisis and direct us forward: overconfidence, the abuse of leverage, the failure of governance, and the consequences of austerity.
First, overconfidence biased the decisions of consumers, investors, business executives, and government officials. Investing in real estate seemed like a sure thing; prices had only one way to go (up). As a famous investor, Sir John Templeton, once said, “The four most dangerous words in investing are ‘This time is different’.” The dangers of overconfidence and mood swings have been the focus of behavioral economists for more than two decades. Robert Shiller won the Nobel Prize in economics for his pioneering work on that. Along these lines, a new book by Nicola Gennaioli and Andrei Shleifer, A Crisis of Beliefs: Investor Psychology and Financial Fragility, builds on a distortion of beliefs about future economic performance that is based on a kernel of truth. Prior to the crisis, investors observed rising home prices and tended to extrapolate past home prices upward into the future and to disregard possible downside risks. They wrote, “people tend to overweight future outcomes that become more likely in light of incoming data…they react to macroeconomic news in the correct direction but excessively. Good macroeconomic news makes good future outcomes more representative, and therefore over weighted, in judgments about future states of the world. The converse is true for bad macroeconomic news.” It is the distorted beliefs that lead to excessive leverage in the upswing of a bubble and the panic to exit the market in the downswing. Their model accounts for the sudden pivots in investor behavior in 2008. The book is wonkish in certain chapters, which the general reader can skip without loss of the argument. Yet its significance lies in the heightened attention that economists are giving to investor “sentiment,” the expectations about the future and the regime shifts in those expectations. The practical implication is that we should pay more attention to “sentiment,” not only in the financial markets, but also in the real economy. My hunch is that natural language processing, data analytics, and machine learning will have big impact here.
The books of Yale professor, Gary Gorton, help to illuminate why overconfidence reliably precedes financial crises. Episodes of confidence breed blissful unawareness. In Slapped by the Invisible Hand: The Panic of 2007 and in Misunderstanding Financial Crises: Why We Don’t See Them Coming, Gorton argues that information asymmetries are a key cause of runs, panics, and crises. Banks are complex institutions, making it difficult for depositors and investors to discern the condition of those institutions. Creditors of a bank are relatively indifferent to the details of a bank’s condition as long as the bank’s assets (the collateral) are high grade. Credit ratings give a general indication of the bank’s assets. Up to some point, the bank’s equityholders and government guarantees will absorb the shock of losses. Therefore, the lenders to bank tend to be sleepy in normal times. Suddenly a shock (such as the collapse of house prices) casts doubt on the value of the bank’s assets and its solvency. The sleepy creditors quickly become information sensitive and with the arrival of adverse news, they begin to run. Two popular solutions are to strengthen the information insensitivity of bank liabilities by increasing the capital base of banks or by enlarging government guarantees of those liabilities. However, Gorton argues that the problem of runs on banks is not capital adequacy; it is illiquidity. This, he says, is the error of misunderstanding systemic crises, and one that drives misplaced measures of systemic stability. A related problem is that in 2008 the worst runs occurred mainly outside of the regulated banks, in the shadows among dealer banks, where regulators were not expecting them.
The second main lesson is that governance (writ broadly) failed us. Regulators slept; private watchdogs did not bark; CEOs and boards of directors chased returns while ignoring risks; and market discipline proved lazy. Activity moved from the sunlight into the shadow financial system, where guardians could not see. Financial innovations deepened linkages among firms and made it harder to know what was going on. That regulators themselves render some of these criticisms acknowledges the gravity of the message.
One avenue of criticism argues that the government’s regulators were “captured” by the bankers, forming a powerful oligarchy that thwarts democratic will. This is the central thesis of Simon Johnson and James Kwak’s 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown. The remedy is simply to break up (or nationalize) the large banks—both to reduce their threat to the stability of the financial system and their economic power to capture the regulatory machinery. This thesis appears also in Elizabeth Warren’s A Fighting Chance.
Or perhaps the failures of governance result from the very efforts to regulate. Charles Calomiris and Steven Haber’s Fragile by design: the political origins of banking crises and scarce credit argues that centuries of populist policy resulted in an over-banked U.S. financial system. At its peak, more than 20,000 institutions—most of them small and undercapitalized—constituted the financial system making it was profoundly vulnerable to systemic shocks. In comparison, Canada’s constituted by four large institutions, each comprised of many branches, enjoyed the benefits of diversification of consumer deposits, and diversification of portfolio risks. Canada’s financial system sailed through the crisis of 2008; the U.S. system did not. They write, “Our answer to the central question posed…–why can’t all countries construct banking systems capable of providing stable and abundant credit?—is that political conditions constrain what is possible. History, and the political institutions that rise from it, play an essential constructive role in banking but also limit what is feasible within each country’s banking system. A major theme of this book is that every country’s banking system is the result of a Game of Bank Bargains, which determines the rules that define how banks are chartered, how they are regulated, and how they interact with the state. Those outcomes, in turn, determine how well the country will perform along two key dimensions: the degree of private access to credit and the propensity for banking crises.”
Peter Wallison’s Hidden in Plain Sight: What Really Caused the World’s Worst Financial Crisis and Why It Could Happen Again expands upon his arresting dissenting opinion to the Report of the Financial Crisis Inquiry Commission (2011). This book describes the role of decades of government policy and regulations in promoting homeownership and the liberalization of credit and says, “the U.S. government’s housing policies caused the crisis.” He concludes that “the bumbling of government officials made a bad situation considerably worse…[and ] the false narrative about the causes of the crisis has both saddled the financial system with the Dodd-Frank Act and made it likely that the same mistakes in housing policy that were responsible for the crisis will be repeated in the future.”
Philip Wallach confronts the profound tension that is latent in debates about the correctness of government responses to the financial crisis. Some critics assert that bailouts and other actions were illegal and inconsistent with Congressional acts and even the Constitution. But Wallach points out that the long history of government responses to financial crises reveals a certain amount of flexibility especially in moments when it is impossible to distinguish insolvency from illiquidity. Wallach’s book, To the Edge: Legality, Legitimacy, and the Responses to the 2008 Financial Crisis, argues in favor of “ad hocracy,” agile government responses to crises that extend “to the very limit of lawful powers” as Paul Volcker said after the Bear Stearns rescue. Wallach argues that four factors determine the legitimacy of such responses: legality, widespread agreement (or “democratic legitimacy”), trust, and accountability. This book is a bracing exploration of resilient governance.
However, if we allow for “ad hocracy,” what prevents the takeover of democratic governments by technocrats? Paul Tucker explores this in Unelected Power: The Quest for Legitimacy in Central Banking and the Regulatory State. This book is an exacting exploration of the strengths and dangers posed by delegation of authority to independent agencies, which by now represent a massive “deep state” within the U.S. government. Congress delegates authority to expert agencies because it has neither the time nor expertise to deliberate on setting and enforcing specific rules for society. Nevertheless, in the instance of the financial crisis of 2008, the improvisations of central bankers stunned the democratically elected representatives of the people to ask whether the delegated powers should be reined in. With the exacting care of an engineer, Tucker develops design criteria and precepts with which a democracy could confidently yield authority to independent agencies such as central banks. Tucker concludes, “we, the people, are not faced with having to choose…Yes, [central banks] carry centralized power…but the credibility that is their stock-in-trade depends on broad public discussion and acceptance…and their legitimacy depends on that together with the checks and balances provided by the [Congress, president, and courts]. Because it relies on a sustained regime, credibility requires legitimacy, which in turn requires delegation via carefully constructed frameworks, ongoing oversight and public debate.”
Tamim Bayoumi’s Unfinished Business: The Unexplored Causes of the Financial Crisis and the Lessons Yet to be Learned, tells us that “missteps by financial regulators, aided and abetted by policy makers’ intellectual blind spots, made the North Atlantic banking system so brittle that the failure of a medium-sized US investment bank toppled the world into the worst recession since the 1930s and the Euro area into a depression.” Bayoumi, an official with the IMF, renders a blunt critique of the EMU that “helped generate the North Atlantic crisis as well as amplify and elongate its costs.” The EMU is a currency union, not a fiscal union, much less a political union. The hope for the EMU’s ability to withstand a future crisis lies in speedy economic integration among countries in the Euro area, which Bayoumi thinks will abet better collective action.
Martin Wolf, however, is less sanguine about such prospects. His book, The Shifts and the Shocks: What We’ve Learned—and Have Still to Learn—from the Financial Crisis, agrees that EMU is fundamentally flawed. And he soberly points to three “shifts” that presage ongoing turbulence: liberalization, technological change, and ageing. Wolf says that the inability of leaders to foresee and respond quickly to these shifts and the crisis that ensued owes to bad economic theory (especially economic theories justifying austerity) and the “emergence of a globalized economic and financial elite that has become ever more detached from the countries that produced them…[which] reduces trust in democratic legitimacy.”
The third main lesson of the crisis is that borrowers abused financial leverage. Financial firms operated on thinner capital bases. Homeowners borrowed against the equity in their homes and borrowed more to speculate in condominiums and second homes. Government borrowed to fund deficits. Financial innovations increased systemic risk in unexpected ways. Atif Mian and Amir Sufi’s House of Debt: How They (and You) Caused the Great Recession, and How We Can Prevent It from Happening Again gives an excellent analysis of the role of the buildup of mortgage debt as a cause of the crisis. They wrote, “both the international and U.S. evidence reveals a strong pattern: Economic disasters are almost always preceded by a large increase in household debt. In fact, the correlation is so robust that it is as close to an empirical law as it gets in macroeconomics. Further, large increases in household debt and economic disasters seem to be linked by collapses in spending…we think debt is dangerous. If this is correct, and large increases in household debt really do generate severe recessions, we must fundamentally rethink the financial system.”
Ray Dalio’s book, A Template for Understanding Big Debt Crises, presents in richly graphic form the crucial roles of inflation and overleveraging in the creation of bubbles and their busts. What is new here is his synthesis across 48 case studies of crises into a template by which the reader might anticipate future crises. I am always skeptical of practitioners’ efforts to boil the ocean down to a quart of wisdom, since financial crises are remarkably idiosyncratic. Fortunately, Dalio avoids the fatal error of such attempts, trivializing the narratives. Dalio sees clearly the interdependencies between politics and economics, between the financial markets and real economy, and between discretion and commitment. His template is useful. And his framing can be arresting. For instance, he distinguishes between “ugly” and “beautiful” deleveraging cycles. All deleveragings are painful (Pakistan and Argentina today), the only question being how soon commences the economic recovery that can truly repay debt, in the absence of which fire sales of assets will continue to the ultimate impoverishment of the country. Dalio’s prose voice is that of a busy CEO. For instance, he wrote, “The worst thing a country, hence a country’s leader, could ever do is get into a lot of debt and lose a war because there is nothing more devastating. ABOVE ALL ELSE, DON’T DO THAT.” For breadth of review, empirical grounding, simplicity of exposition, use of graphic presentation, and integration of fiscal and monetary perspectives, Dalio’s book warrants attention among the best texts on crises.
Adair Turner, former Chairman of the UK’s Financial Services Authority from 2008 to 2013, takes up the vulnerabilities induced by rising debt: myopia, the susceptibility to “sudden stops” in credit supply, plummeting asset prices, and ultimately a debt-deflation spiral. His recommendation, vividly argued in Between Debt and the Devil: Money, Credit, and Fixing Global Finance, is simply to curtail growth in the supply of credit. Inveighing against “debt pollution,” he advocates that banks should hold 100% reserves against deposits, reining in the shadow banking system, and generally curtailing the supply of credit for speculative purposes. Against the risk that credit curtailment would cut economic growth, he wrote, “These elements will be criticized as dangerously interventionist, replacing the allocative wisdom of the market with imperfect public policy judgments. But free markets in credit creation can be chronically unwise and unstable…we need to recognize that free markets do not ensure a socially optimal quantity of private credit creation or its efficient allocation. …we must constrain the overall quantity of credit and lean against the free market’s potentially harmful bias toward the “speculative” finance of existing assets. …a large proportion of credit is not essential to economic growth….Our explicit objective should be a less credit-intensive economy.”
Two provocative books tackle the problem of leverage inherent in banks. Those institutions typically operated on a base of equity (the shock absorber in case of trouble) that was around ten percent of all the assets they carried: for every one dollar of cushion, they carried ten dollars of assets. Anat Admati and Martin Hellwig’s book, The Bankers’ New Clothes: What’s Wrong with Banking and What to Do about It, argue that unrealistically low capitalization requirements for banks render the system unstable. They advocate policies that would almost triple the required capital for banks. Morgan Ricks’s The Money Problem: Rethinking Financial Regulation, goes further and proposes radical reform of banking and the imposition of bank capital requirements equal to 100% of bank assets.
Counter-opposed to Turner and the others who advocate government intervention in markets is John Allison, former CEO of BB&T bank. He argues in the Financial Crisis and the Free Market Cure: Why the Future of Business Depends on the Return to Life, Liberty, and the Pursuit of Happiness that the solution is less, not more, government regulation of the financial sector. He says, “Government policy is the primary cause of the financial crisis,” which is unremarkable in the sense that most analysts attribute the crisis (at least in part) to policy flaws of one kind or another. Where Allison stands apart from the crowd is in criticizing government for intervening in the crisis at all: “Individual financial institutions (Wall Street participants) made very serious mistakes that contributed to the crisis. These institutions should have been allowed to fail…Almost every governmental action taken since the crisis started, even those that may help in the short term, will reduce our standard of living in the long term…Intentions that are called “good” often do not produce favorable outcomes.” Allison fears no economic spillovers such as animated Bernanke, Geithner and Paulson. One is reminded of Andrew Mellon’s remedy for depressions (as reported by Herbert Hoover) “Liquidate labor, liquidate stocks, liquidate the farmers, liquidate real estate. It will purge the rottenness out of the system. High costs of living and high living will come down. People will work harder, live a more moral life. Values will be adjusted, and enterprising people will pick up the wrecks from less competent people.” Though “liquidation” is exactly what happens in an economic contraction, such a platform seems unlikely to win votes. Allison is a crusader who aims to speak truth to power. Any well-read student of the financial crisis should understand the libertarian analysis alongside that of the mainstream and the radical. Allison lends an arresting counterpoint to conventional wisdom.
Banks may appear to engage in sleight-of-hand: they accept a relatively small amount of deposits and churn out a relatively large amount of credit. This is the “alchemy,” to which Mervyn King, former Governor of the Bank of England from 2003 to 2013, refers in his book, The End of Alchemy: Money, Banking and the Future of the Global Economy. He attributes the financial crisis of 2008 to the alchemists who have turned the financial services industry from a benign to a malign force—coming from a prominent central banker this is strong medicine. And in contrast to mainstream economics that relies on assumptions of rationality, he cottons to “radical uncertainty,” in which the future is essentially unknowable. He writes, “The failure to incorporate radical uncertainty into economic theories was one of the factors responsible for the misjudgements that led to the crisis.” The failure to recognize radical uncertainty led to “Expectations of continued steady growth [that] were self-reinforcing.” His critique along these lines is stimulating and complements those of Turner and others in this review: bad theories and complacent expectations can get you in trouble. But in contrast to his radical critique, King’s prescriptions for the future seem rather mainstream: coordinate better among central banks; let exchange rates float; improve productivity as the source of all real growth; stimulus, not austerity, must be the escape vehicle for economic growth; economic growth reinforces democracy while contraction strains it. Perhaps King intends that a conclusion based on these nostrums should reinforce an optimistic outlook. But it surely impresses one that the creation of credit—King’s “alchemy”—is but a smallish contributor to our economic future.
Dodges, pivots, and departures characterized government policy more than consistency. Perhaps the most prominent was the decision to lend no support to the rescue of Lehman Brothers. Bernanke asserted that the Fed had no authority to support Lehman’s survival, the absence of a qualified buyer and with insufficient collateral to support a loan. A new study by Laurence Ball, the chair of economics department at Johns Hopkins, challenges that explanation. Drawing on information available at the time and on evidence presented later in Lehman’s bankruptcy proceedings, The Fed and Lehman Brothers: Setting the Record Straight on a Financial Disaster finds that Lehman’s collateral was sufficient and concludes that the decision to withhold support owed to rising political opposition to financial rescues. This is a controversial finding that seems to shrug off the difficulties of analysis in the middle of a maelstrom and discounts politicians’ legitimate concerns about moral hazard.
The dominant post-crisis response to the crisis was passage of the Dodd-Frank Act. This quickly became the piñata for critics across the political spectrum, prompting even Barney Frank to express regrets about the act later. Two books address the controversies in this controversial legislation. Harvard law professor, Hal Scott, decried the misplaced emphasis on “connectedness” when we need to give more attention to contagion. Dodd-Frank focuses on connectedness among banks as a source of systemic instability—especially the designation of Systemically Important Financial Institutions (SIFIs) and the doctrine of “too big to fail.” This would be like putting a feverish patient on a diet instead of trying to lower her temperature. Instead, regulation should focus on the ability to fight contagion, the ways by which the crisis spreads, and the agile supply of new liquidity as a means to fight contagion. Scott’s Connectedness and Contagion: Protecting the Financial System from Panics is an impressive (if at times dry) overview of America’s financial regulations and its yawning gaps in respect to crisis fighting. On the other hand, Penn law professor, David Skeel, criticizes Dodd-Frank as an unnecessary complication of bankruptcy law. The spirit of Dodd-Frank’s “orderly liquidation authority” is quickly to resolve uncertainty for depositors and investors in a failed bank. The belief is that such uncertainty drives panic and contagion. However, in The New Financial Deal: Understanding the Dodd-Frank Act and Its (Unintended) Consequences, Skeel says that the standard bankruptcy procedures work just fine and would have resolved plenty of uncertainty if they had been allowed to function in 2008. He argues that bankruptcy law can easily facilitate asset dispositions, in contrast to the view by some that the bankruptcy process is slow and troublesome. Furthermore, bankruptcy can make it easier for the debtor to obtain credit during the workout. He wrote that Lehman’s “ability to obtain priority financing in bankruptcy allowed it to take time with these assets and sell them into the market at times and prices that were driven more by value maximization than by a desperate scramble for liquidity…in fact, bankruptcy worked quite well.” Finally, Skeel worries that Dodd-Frank’s designation of SIFIs enshrines a banking oligopoly that will enjoy lower cost of funds because of the implied government assurance of “too big to fail.”
Ultimately, any assessment of the crisis of 2008 should rise to the very macro level. In Fault Lines: How Hidden Fractures Still Threaten the World Economy, Raghuram Rajan argues that embedded weaknesses in the U.S. and global economic systems make them inherently unstable. He emphasizes three “fault lines.” One is U.S. domestic policy that promoted homeownership by the poor rather than provide a strong social safety net. One could point further to unwise use of auto loans, student loans, and credit card debt. As inequality has risen, the democratization of credit led to the socialization of rising default risk. Second, rising trade imbalances meant that developing countries grew addicted to export-led growth and that the U.S. generally financed growing imports with loans from abroad. Third, the global finance of trade imbalances led to a “clash of systems. Loans to finance the export boom in developing economies were denominated in dollars. As exchange rates and primary demand in developed countries fluctuate, the financial stresses on developing economies vault upward. Rajan argues that a system built on these fault lines is not sustainable. He wrote, “Prudent macroeconomic management suggests that large-deficit countries [e.g. the U.S.] should be more careful about spending and save more.”
Finally, a fourth major lesson of the crisis regards the uses and abuses of fiscal austerity as a response to financial crises. A debate that smolders still today is whether the governments in the U.S. and Europe did enough to stimulate their economies back onto a growth trajectory. Of course, the question is “What defines enough?” Barry Eichengreen’s Hall of Mirrors: The Great Depression, the Great Recession, and the Uses—and Misuses—of History serves up a highly stimulating comparison of the U.S. response to the Great Depression and to the Great Recession. The gist of Eichengreen’s thesis is that the responses differed sharply as demonstrated by the fact that productivity rebounded sharply after 1933, but not after 2008. The source of the difference, he argues, lies in the fact that U.S. and European governments responded in 1933 with aggressive fiscal and monetary policies, whereas after 2009, the monetary accommodation was aggressive, but fiscal stimulus was anemic. Among the numerous pointed insights in this book is the following: “The single greatest failure to learn appropriate lessons from this earlier history was surely the decision to adopt the Euro. The 1920s and 1930s illustrated nothing better than the dangers of tying a diverse set of countries to a single monetary policy. …This failure is a reminder that there does not in general exist a single historical narrative, but several. History is contested.”
The threat of austerity was not without its warnings in 2010: Nouriel Roubini and Stephen Mihm drew on a similar kind of historical analysis to argue that financial crises require superordinate exertions. Crisis Economics: A Crash Course in the Future of Finance argues that deflationary episodes in U.S. economic history reveal enormous costs—both economic and social—that warrant serious intervention by the government. It is not possible, they argue, to restore economic growth merely by changing monetary policy toward accommodation. Yet, they also note that fiscal stimulus is typically slowly enacted by Congress and then slowly implemented (for instance, not all infrastructure projects are “shovel ready.”) Therefore, they endorse liberal rescue terms for banks, injections of bank capital, bank restructurings (good bank/bad bank). In their view, the fiscal stimulus by government should be followed by vigorous regulatory intervention to prevent future crises. In for a penny, in for a pound.
One of the more radical approaches to fiscal stimulus and recovery is discussed in Steve Keen’s Can We Avoid Another Financial Crisis? There, he assess the crisis propensity induced by overconfidence, the abuse of leverage, the failures of governance, and the inadequacy of normal fiscal stimulus proposals and proposes instead “a “Modern Debt Jubilee’…a direct injection of money into all private bank accounts but require that its first use is to pay down debt.” This, he claims, would favor neither creditors nor debtors, and would instantly relieve the overleverage in the economy, while stimulating consumption. As with other kinds of government interventions, one wonders how implementation of this proposal in a crisis would alter expectations of investors, debtors, managers, and consumers. If rescues of individual banks kindle moral hazard, would an economy-wide debt jubilee inflame a bonfire of moral hazard?
So, what does ten years of books on the financial crisis of 2008 tell us? What should we learn from the crisis? Serious readers of the crisis will distill these books into a long list lessons. Here are my top five.
First, the crisis was a “wicked problem:” confusing, difficult, and constantly morphing. The books to avoid are those that would have you believe a simple explanation for what happened or in a single preventative to future crises. Financial crises rank at the level of war, poverty, and climate change—not least because of their consequences. The cumulative output gap following the financial crisis of 2008 amounted to between $6 and $14 trillion. From peak to trough in 2008, 8.8 million jobs were lost and $19.2 trillion in household wealth evaporated.
Second, government officials muddled through, probably avoiding another Great Depression, but at mind-boggling commitment of resources and the violation of longstanding norms and expectations. However, doing nothing was not an option. In the midst of a financial crisis, leadership proves its value. As Milton Friedman and Anna Schwartz wrote almost 50 years ago, “The detailed story of every banking crisis in our history shows how much depends on the presence of one or more outstanding individuals willing to assume responsibility and leadership… In the absence of vigorous intellectual leadership…the tendencies of drift and indecision had full scope. Moreover, as time went on, their force cumulated. Each failure to act made another such failure more likely.”
Third, the crisis exposed deep vulnerabilities in our financial system that have not yet been fixed, that might never be fixed, and that presage future instability. Markets have a propensity toward over-confidence. Systems of governance—the front-line defense against crises—can grow lax. And accommodative credit will be abused. As a result, financial crises will reoccur. The research of Carmen Reinhart and Kenneth Rogoff documented the fact that from 1800 to 2012 almost no year was free of financial crises somewhere in the world. Financial crises are a fact of life; no experts believe that we have now eliminated the threat of future financial crises. Familiarity with the causes, consequences, and remedies of financial crises would be valuable preparation for future leaders in business, government, and the professions.
Sadly, memories are short. These days, many instructors encounter the glaze of unfamiliarity that descends when one discusses the financial crisis of 2008. Today’s MBA students were in high school and undergraduates were middle-schoolers. Even adults display a desire to forget and move on from the late unpleasantness. Nevertheless, collective memory is the bedrock of wisdom. Walter Wriston (former CEO of Citibank) famously said, “Good judgment comes from experience; and experience comes from bad judgment.” Remembering the bad judgments that underpinned previous financial crises is profoundly important for future wisdom.
Moreover, to understand crises is to know capitalism better. Karl Marx and others have pointed to the recurrent financial crises in capitalist economies as proof of the terminal illness of the capitalist system. On the other hand, Joseph Schumpeter and others averred that periodic slumps and crises were healthy laxatives, necessary cleansers of economic inefficiencies that presage growth. Schumpeter called capitalism a “gale of competition.” Financial crises expose the worst (and sometimes the best) in markets, institutions, instruments, leaders, and entrepreneurs.
Finally, to understand crises is to better understand ourselves. The Great Depression was the major economic event of the 20th century, one that profoundly affected national and world history, directly touching millions of families. It is too early to tell how—or even whether—the financial crisis of 2008 and its aftermath will settle into our collective memory. The books described here not only inform us about past events and suggest how we might act differently in the future but also help us better understand what it means to be human beings and citizens—who we are, how our characters and our limitations shape our communities, and how we ought to strive to live well and wisely together.
 Robert Shiller, Irrational Exuberance, 2014 (third ed.), Kindle edition, loc 220.
 Edward M. Gramlich, Subprime Mortgages: America’s Latest Boom and Bust, 2007 page 79.
 Michael Lewis, The Big Short, (2011) page 256.
 Andrew Ross Sorkin, Too Big to Fail, (2009) pages 534-535.
 Alan Blinder After the Music Stopped (2013), page 438.
 Irwin, page 213.
 Irwin, page 390.
 Irwin, page 358.
 Sheila Bair, Bull by the Horns, 2012, page 119.
 Frank, 2015, page 301.
 The “attempted coup” (Volcker, 2018, page 142) occurred on Feb. 24, 1986, when four Fed Governors outvoted Volcker and two other Governors, apparently in an attempt to motivate Volcker’s resignation. See Hobart Rowen, “Volcker’s Dilemma,” Washington Post, March 23, 1986, downloaded October 16, 2018 from https://www.washingtonpost.com/archive/business/1986/03/23/volckers-dilemma/d6c8a6c5-2908-4eac-a47d-2ec85aebb294/?noredirect=on&utm_term=.7c6259582768.
 Paul Volcker, Keeping At It, 2018, page 208.
 Paul Volcker, Keeping At It, 2018, page 208.
 Quotation of Volcker in “The only thing useful banks have invented in 20 years is the ATM,” New York Post, December 13, 2009, downloaded October 17, 2018 from https://nypost.com/2009/12/13/the-only-thing-useful-banks-have-invented-in-20-years-is-the-atm/.
 Paul Volcker, Keeping At It, 2018, page 213.
 Alistair Darling, Back from the Brink, 2011, page 3.
 Ibid. page 3.
 Ibid. page 57.
 Ibid. page 323.
 Irwin, page 202.
 Philip Inman, “Primary Greek Tax Evaders Are the Professional Classes,” The Guardian, September 9, 2012, downloaded October 16, 2018, from https://www.theguardian.com/world/2012/sep/09/greece-tax-evasion-professional-classes?CMP=twt_gu.
 Gennaioli and Shleifer, A Crisis of Beliefs, 2018, page 13.
 Charles Calomiris and Stephen Haber, Fragile by Design, 2014, page 477.
 Peter Wallison, Hidden in Plain Sight, 2015, page 5.
 Wallison ibid. page 26.
 Paul Tucker, Unelected Power, 2018, pages 567-8.
 Bayoumi Unfinished Business, 2018, page 1.
 Bayoumi ibid. page 229.
 Martin Wolf, The Shifts and the Shocks, 2014, page 114.
 Wolf ibid. page 352.
 Atif Mian and Amir Sufi, House of Debt, 2014, pages 9 and 14.
 Ray Dalio, A Template for Understanding Big Debt Crises, 2018, Kindle Edition, loc. 1405 of 11361.
 Adair Turner, Between Debt and the Devil, 2016, page 208.
 John Allison, The Financial Crisis and the Free Market Cure, 2013, pages 6-8.
 Herbert Hoover, The Memoirs of Herbert Hoover: 1929-1941 the Great Depression, 1952, New York: McMillan page 30
 Mervyn King, The End of Alchemy, 2016, page 9.
 King, Ibid, page 317.
 Other analysts, such as Stephen Cechetti and Kermit Schoenholtz believe that Ball’s estimates of Lehman’s solvency was “very hopeful,” based on an analysis of Lehman’s market value of equity and on the widespread doubts of Lehman’s solvency. See “The Lender of Last Resort and the Lehman Bankruptcy” (July 25, 2016) at Money and Banking blog, https://www.moneyandbanking.com/commentary/2016/7/25/the-lender-of-last-resort-and-the-lehman-bankruptcy.
 Barney Frank expressed regrets that the asset size above which banks would be supervised with high scrutiny were set too low. And he believes that the Consumer Financial Protection Bureau was weakened later on. See “Dodd-Frank Five Years Later: Barney Frank’s Greatest Victory, Regret,” November 6, 2015 at http://mitsloan.mit.edu/newsroom/articles/dodd-frank-five-years-later-barney-franks-greatest-victory-regret/. Also see Nick Tabor, “Barney Frank on His Regrets from the Great Recession” New York Magazine, August 8, 2018 at http://nymag.com/intelligencer/2018/08/barney-frank-on-his-regrets-from-the-great-recession.html. And see Harper Neidig, “Barney Frank Admits ‘Mistake’ in Dodd-Frank,’ The Hill, November 20, 2016 at https://thehill.com/policy/finance/banking-financial-institutions/306906-barney-frank-admits-mistake-in-dodd-frank.
 David Skeel, The New Financial Deal, 2011, pages 30-31.
 Raghuram Rajan, Fault Lines, 2010 page 204.
 Eichengreen, 2015, page 382.
 Keen, 2017, page 118.
 Tyler Atkinson, David Luttrell, and Harvey Rosenblum, “How Bad Was It? The Costs and Consequences of the 2007-2009 Financial Crisis,” Staff Papers of the Federal Reserve Bank of Dallas, July 2013, downloaded June 15, 2018 from https://www.dallasfed.org/~/media/documents/research/staff/staff1301.pdf.
 “The Financial Crisis Response in Charts,” U.S. Treasury Department, April 2012, page 3, downloaded June 15, 2018 from https://www.treasury.gov/resource-center/data-chart-center/Documents/20120413_FinancialCrisisResponse.pdf.
 Milton Friedman and Anna Jacobson Schwartz A Monetary History of the United States, 1857-1960, Cambridge: NBER, 1964, page. 418.
 See Carmen M. Reinhart and Kenneth S. Rogoff, This Time is Different: Eight Centuries of Financial Folly, 2009, Princeton: Princeton University Press.
 Micklethwaite, J., and A. Wooldridge, The Witch Doctors: Making Sense of the Management Gurus, 1996, New York: Times Books, page 122.