Finances Critical Book Reviews America's Book Review

  • Length: 10 pages
  • Sources: 10
  • Subject: Economics
  • Type: Book Review
  • Paper: #79526987

Excerpt from Book Review :

Sorkin, however, posits no argument per se. Rather, his book offers insight into how the financial crisis manifested from a far more personal perspective of those involved than anything else. The book is informative in nature, and give insight into some of the thought processes and activities those on the outside may not otherwise be exposed to or privy to. The title of the book sums it up best, and the book outlines how the banks and the primary players and stakeholders have become too big to fail. The book highlights the self-interest of those in charge of some of the biggest financial institutions in the world and their blatant disregard for Main Street.

The book has a place in the larger academic debates raised within public knowledge because it adds to the public's real knowledge of those involved in the nation's financial industry and government offices. Instead of speculating as to what a particular CEO was thinking, Sorkin's book provides that stakeholder's own words and his own thought processes. Those who would benefit from reading this book would be those interested in the process; the process of how decisions are made, who and what impacts those decisions, who bears the ultimate brunt of those decisions, and what the real genuine goal of those decisions are. The book can be used as supportive documentation to scholarly debate, as well as a documented series of day-to-day activities of the most recent financial crisis.

Paulson, Henry. (2010). On the inside: The race to stop the collapse of the global financial system. New York: Business Plus.

Paperback: $16.99

ISBN: 0446561940

Grand Central Publishing Company

Henry Paulson was the United States Secretary of the Treasury from 2006 to January 2009. A graduate of Harvard, Paulson joined the firm of Goldman Sachs in 1974, and was named CEO of the company in 1999.

In Sorkin's book "Too Big to Fail" he dedicates almost an entire chapter to Henry Paulson; his history on Wall Street and his tenure in the Bush administration. According to Sorkin's writings, Paulson had concerns about the market early on in his appointment as a part of the Bush administration. During his first briefing with President Bush in 2006, Paulson is said to have warned that the "economy was overdue for a crisis" (Sorkin, 2009). "Where there is a lot of dry tinder out there, you never know what will light it. We have these periods every six, eight, ten years, and there are plenty excesses" (61).

Ben Bernake worked closely with Paulson; and the two were determined to ensure the financial sector remained operational for a long enough period of time so that it could repair itself. This policy of self repair was referred to by Bernake and others within his group of federal colleagues as the "finger-in-the-dike" strategy. He and Paulson worked together to secure the first 85 billion dollars for the financial bailout of A.I.G. Paulson is said to have agreed to the bailout even though it ran counter to what the Bush administration's system of free market principles, and his own expressed belief that reckless behavior should not be rewarded.

However, this was an emergency, a financial crisis of a magnitude he had not seen before in his thirty two years on Wall Street. And because of the sheer magnitude of the problem, he agreed with Bernake that in this situation, "pragmatism trumps ideology" (Cassidy, 2008). Paulson in his book and personal account says that in order to save free enterprise capitalism, "he had to preside over government intervention and bank bailouts, so "I had been forced to do things I did not believe in to save what I did believe in" (Paulson, 2010).

The most serious charge levied against Paulson and Bernake is that their response to the crisis had been ad hoc -- non-generalizable and for a specific purpose, as well as contradictory in rescuing Bear Stearns but allowing Lehman Brothers to fail. There were moths prior to the first use of taxpayers' money that the pair dismissed the danger from the subprime crisis and then quite suddenly announced that the situation was grave enough to justify the bailout (143). In total, Paulson and Bernake wanted 700 billion dollars of tax payer and government funding to purchase distressed mortgage securities, and then within a few months, used the money to shore up Wall Street by purchasing stock in banks instead. Paulson and Bernake's reversals were and still are deeply unsettling to the millions of Americans who defaulted on mortgages and lost jobs as a result of the faulty financial bubble bursting.

The views on Paulson's role and responsibility as it relates to the financial crisis are as divided as the Democrats and Republicans' in government. Some have argued that Paulson was the voice of reason; that he was responsible for balancing the unintelligent responses of a lame duck president (uncredited, 2009). Others have argued that he didn't want to look like a patsy to his friends on Wall Street or his new cohorts in the Bush administration. The insider account rendered by Paulson is about as close to the fire as one can get. He was instrumental in the plan developed to bailout Wall Street, and at the same time, because of his history, had an intimate knowledge of the banking industry itself. The book is relevant, and because of his background, his accounts bear noting. What is interesting about Paulson's argument, if you will, is that it is his argument. He talks a great deal about the inherent conflicts he faced from 'being on both sides of the fence', or the perception that he was doing so. The book is written as a Memoir; not a textbook on how to manage the financial crisis, but more on what he did as a part of the process. As with Sorkin's boo, Paulson's memoirs provide a great deal of insight into the inside activities, processes, and antics of the financial crisis. Those interested in a verbatim account will find the book useful. Its value lies in understanding what occurred, and possibly using the information to provide insight as to how to avoid a similar situation in the future.

References

Cassidy, J. (2008). Anatomy of a meltdown, New Yorker, 84(39), 1-756.

Cherry, C. (1998). God's new Israel: Religious interpretations of American destiny.

UNC Press Books.

Cohan, W. (2010, Nov. 27). The power of failure. New York Times. Retrieves from www.thenewyorktimes.com.

Foster, J., & Holleman, H. (2010). The financial power elite, Monthly Review: An Independent Socialist Magazine, 62(1), 1-19.

Johnson, S., & Kwak, J. (2010). The wall street takeover and the next financial

Meltdown. New York: Pantheon Books.

Paulson, H. (2010). On the inside: The race to stop the collapse of the global financial system. New York: Business Plus.…

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