One of our wisest and most clear-eyed economic thinkers offers a masterful narrative of the crisis and its lessons Many fine books on the financial crisis were first drafts of history—books written to fill the need for immediate understanding. Alan S. Blinder, esteemed Princeton professor, Wall Street Journal columnist, and former vice chairman of the Federal Reserve Board, held off, taking the time to understand the crisis and to think his way through to a truly comprehensive and coherent narrative of how the worst economic crisis in postwar American history happened, what the government did to fight it, and what we can do from here—mired as we still are in its wreckage. 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. Things started unraveling when the much-chronicled housing bubble burst, but the ensuing implosion of what Blinder calls the “bond bubble” was larger and more devastating. Some people think of the financial industry as a sideshow with little relevance to the real economy—where the jobs, factories, and shops are. But finance is more like the circulatory system of the economic body: if the blood stops flowing, the body goes into cardiac arrest. 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. Some observers argue that large global forces were the major culprits of the crisis. Blinder disagrees, arguing that the problem started in the U.S. and was pushed abroad, as complex, opaque, and overrated investment products were exported to a hungry world, which was nearly poisoned by them. The second part of the story explains how American and international government intervention kept us from a total meltdown....
As the U.S. economy desperately tries to crawl out of its gloomy cave, many still feel the impact of the 2007 financial crisis. Here, noted analyst Blinder (The Quiet Revolution) provides insights on why it happened, covering three critical questions: How did we get into this mess? What was done to correct problems? and have we learned anything? He opens by addressing the rise of unemployment rates and the housing market crash, with Blinder explaining what happened to big players like AIG, Merrill Lynch, and WaMu as they collapsed. He provides a clear critical analysis of the actions authorities proposed to prevent large corporations from crumbling, and offers his own opinion on how to fix the system. Later chapters explain the key weaknesses that predate the fateful summer of 2007, and what happened to the citizens, why the government took the actions it did, and why those policies were wise. As Blinder outlines the causes of the financial crisis, he acknowledges that questions still linger in the public mind: Has history taught us anything, or are we headed for a repeat of this kind of crisis?