The holidays must be approaching – at least, I'm getting that irresistible urge to sit in the garden and read books rather than sitting at my desk writing articles. I polished off Tim Harford's terrific new book Adapt, but am not allowed to review it until near its publication date. I'm midway through David Marquand's Death of the West, which is very thought-provoking especially after David Runciman's lecture on 'the democratic trap' during the week.
In the absence of a review, however, it seems well worth pointing readers of this blog to Jeff Madrick's excellent feature in the current New York Review of Books covering books about the financial crisis. One of the titles he covers, the report of the Financial Crisis Inquiry Commission, has been reviewed on this blog by Phil Thornton. Madrick calls it: “[T]he most comprehensive indictment of the American financial failure that
has yet been made” This in a field which includes indictments such as Matt Taibbi's utterly brilliant Griftopia.
The article also covers the Charles Ferguson documentary Inside Job (the movie website – slow to load), well worth viewing, and two other titles for which I'm currently seeking reviewers for The Business Economist. Volunteers welcome! They are
Regulating Wall Street: The Dodd-Frank Act and the New
Architecture of Global Finance
edited by Viral V. Acharya, Thomas F. Cooley, Matthew
P. Richardson, and Ingo Walter
Reforming US Financial
Markets: Reflections Before and Beyond Dodd-Frank
by Randall S. Kroszner and Robert J. Shiller, edited
and with an introduction by Benjamin M. Friedman
This week has of course brought publication of the UK's own polite inquiry into the crisis, the Interim Report of the Vickers Commission. The analysis in the document is compelling, but the proposals feeble, the outcome of intense lobbying by the banks. I wrote about its inadequacies in the FT (registration/£), along with Professor Jonathan Haskel, earlier in the week. Will Hutton has a strongly critical column about it in today's Observer.
In his article, Madrick notes that the US at least has the Dodd-Frank Act and that didn't go far enough:
“The Dodd-Frank Act could have been much more effective. It could, from
the outset, have set high capital requirements—the amount of money that
banks and other financial institutions have to put aside for possible
losses. It could have broken up today’s enormous banks, which have grown
rapidly in size since the crisis. Measured by their profits, the six
largest financial institutions in the US now
account for 55 percent of all banking assets. It could have divided the
banks by function in order to reduce the overlapping of investment
activities, which increases the chances of damage to the entire
financial system. For example, those banks that accept federally insured
deposits from savers could have been restricted to making loans to
consumers and businesses.”
We in the UK haven't got anywhere yet in terms of banking reform, and it looks like whatever emerges from the Vickers Commission will be even less effective.