This book was written by John Allison, who served as the CEO of BB&T Bank for many years, and helped that company to grow into one of the largest and most successful financial institutions in the country. His knowledge, insights and years of experience working within the financial industry and with the government agencies, politicians and bureaucrats form a solid basis from which he lays out a clear and compelling case for the causes of the financial crisis and following Great Recession.
Although I had a couple of minor issues with the book (being not a financial person myself, a little bit better explanation of certain financial terms would have been nice in a couple of places, and there were a number of typos), overall I was extremely impressed with Allison's clear explanations of various aspects of the financial industry, including the use of good, simple metaphors to help concretize complex issues or aspects of the industry that are on a scale too large to easily contemplate without financial expertise.
Furthermore, he digs very deeply not just into the proximate causes of the financial crisis (the "housing bubble," a massive misallocation of money encouraged by Federal Reserve monetary policy and political incentives pushing home ownership), but also into the deeper underlying economic problems that government agencies and policies represent (such as the impossibility of the sort of currency manipulation that the Federal Reserve attempts to do, the inevitable and damaging inflation that necessarily results, the monopolizing effect of agencies such as Fannie Mae and Freddie Mac, etc.). Allison shows clearly why it is not just that the current political and bureaucratic actors in these agencies made poor decisions (which they did), but that no one in any sort of "centralized control" position in an economy can ever make correct or good decisions - there is simply no way that one person, or one group of people, can make economic and financial decisions which actually need to be made by every single individual who is in any way part of the economy. Allison also hits very hard against the idea of any company being "too big to fail," pointing out that in fact the bigger a company is, the more important it is to allow it to fail if it does poorly, so that the people and resources of that company can be re-allocated and reinvested into parts of the economy where they will actually do some good.
One aspect of the book that I especially liked were his points about incentives and human action. While laying blame on both government actors and the management/employees of various companies where it is due, he is also careful to point out the reasons why a certain CEO acted in a certain way even though it was harmful to his company in the long-term, and why a political appointee or a lifetime bureaucrat are going to have incentives that are necessarily in conflict with individuals trying to act in a market economy. He explains, often in detail, how various government regulations that are supposed to make the economy "safer" and more stable in fact have the exact opposite affect; by providing a "safety net," companies are in fact incentivized to take on more risk, rather than less, and it is U.S. taxpayers who then have to bear the burden when inevitably that risk-taking (which would not have happened in a truly free market) has negative consequences.
Lastly, Allison takes his analysis one level deeper, and looks at the underlying philosophical premises in our culture today that encourage government intervention in the economy despite its proven negative consequences, and the philosophical ideas that we will need to learn (or in some cases relearn) in order to move towards a freer and more stable economy. His treatment of these issues is perhaps somewhat brief, but fits well into the context of the book, and he provides clear suggestions of further sources for a more in-depth look at the connection between philosophical and political/economic ideas.
I enjoyed this book a great deal, and I definitely learned a lot. I would recommend it to anyone interested in the financial crisis and the economic, political and philosophical issues surrounding it, especially if you are looking for the views of a knowledgeable and qualified insider, and a very non-mainstream point-of-view.
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Top reviews from other countries
park3r
So many nuggets of good information.
Reviewed in the United Kingdom on September 1, 2018Celestra Cassidyne-Hook
Excellent first-hand analysis. Highly recommended!
Reviewed in Canada on August 19, 2016