Restoring Financial Stability: How to Repair a Failed System (Wiley Finance)

08.03.10 / Uncategorized / Author: admin
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Restoring Financial Stability is, in this reviewer’s opinion, the single most comprehensive book published to date on the great credit meltdown that began in 2007 and is now nearing two years in length. The book is organized as a series of parts covering different aspects of the crisis, each of which is in turn divided into 2-3 chapters that are essentially
“white papers” written by different contributing authors. The book begins with a well-written overview chapter describing the key events of the crisis up to the time of publication. The book then moves into the causes and sub-causes of the crisis, with the general thrust moving over time from descibing what happened to prescriptions for preventing future occurrences.

While the individual chapters are written by different contributors, the book reads smoothly and does not feel disjointed as is sometimes the case with books that have multiple authors. The book’s organization and editing makes it seem as if it was written by a single author. While it offers much more sophisticated insight than what has generally been written in the business and financial press (let alone the general news media), I think that most readers with a decent working knowledge of financial markets will find it to be quite accessible.

The book contains many insights that go far beyond the fairly simplistic explanations that have abounded in the news media. I found the following to be particularly valuable:

(1) The makes an excellent argument that the credit risk transfer process was not flawed in itself but that the large financial institutions chose to not make full use of the risk transfer tools available to them. Through the sponsorship of SIV’s, retention of CDO super senior risk, and other moves, many of the large banks effectively kept much of the risk that was supposedly being passed on to other market participants.
(2) The book offers some very usedul insights on the evolution of large complex financial institutions (“LCFI’s”), how they grew out of the regulatory relaxation that began in the 1990′s, and how the systemic risks created by LCFI’s have effectively subsidized the companies and led to inefficient (for the system as a whole) compensation arrangements.
(3) Another recurring theme throughout the book is how rules and financial market innovations intended to reduce institution-specific risks were effectively “gamed” by different market participants to create a tremendous level of systemic risk.

Restoring Financial Stability is a must-read for anyone who is trying to make sense of the continuing financial crisis, and I recommend it highly.

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Product Descriptions

An insightful look at how to reform our broken financial system

The financial crisis that unfolded in September 2008 transformed the United States and world economies. As each day’s headlines brought stories of bank failures and rescues, government policies drawn and redrawn against the backdrop of an historic Presidential election, and solutions that seemed to be discarded almost as soon as they were proposed, a group of thirty-three academics at New York University Stern School of Business began tackling the hard questions behind the headlines. Representing fields of finance, economics, and accounting, these professors-led by Dean Thomas Cooley and Vice Dean Ingo Walter-shaped eighteen independent policy papers that proposed market-focused solutions to the problems within a common framework. In December, with great urgency, they sent hand-bound copies to Washington. Restoring Financial Stability is the culmination of their work.

  • Proposes bold, yet principled approaches-including financial policy alternatives and specific courses of action-to deal with this unprecedented, systemic financial crisis
  • Created by the contributions of various academics from New York University’s Stern School of Business
  • Provides important perspectives on both the causes of the global financial crisis as well as proposed solutions to ensure it doesn’t happen again
  • Contains detailed evaluations and analyses covering many spectrums of the marketplace

Edited by Matthew Richardson and Viral Acharya, this reliable resource brings together the best thinking of finance and economics from the faculty of one of the top universities in world.

  • ISBN13: 9780470499344
  • Condition: NEW
  • Notes: Brand New from Publisher. No Remainder Mark.

Available at Amazon

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