Posts Tagged ‘Banking’

Book Review: 13 Bankers

Tuesday, June 15th, 2010

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Johnson, Simon. 13 bankers : the Wall Street takeover and the next financial meltdown. Pantheon Books, 2010.

Since the economic crisis of 2008, dozens of new books have been written about the meltdown, some of them reviewed in this blog. In this important new work, the authors show how the financial sector and its political influence are a serious risk to the economic well-being of the global economy.

The top six banks together control assets amounting to 60 percent of the U.S. GDP. These top tier financial institutions, including Bank of America, JPMorgan Chase and Goldman Sachs, are too big and too important to fail. The financial crisis made them even bigger, enlarging their market shares in derivatives, mortgages and credit cards. Yet these banks continue to take enormous risks, knowing that the government will shelter them from harm in a downturn.

Significant change is needed to address the disproportionate wealth and power in these large banks. To return to a healthy balance in our economy, the authors recommend that banks be “busted,” such that each bank is no more than 4% of U.S. GDP, with investment banks having a lower limit of 2%. Banks could then be allowed to fail without threatening the entire economy. Reckless borrowing and lending would cease and the boom/bust cycles would end. Taxpayers could stop subsidizing wealthy bankers through bailouts.

Author Simon Johnson was formerly chief economist at the International Monetary Fund. He was a faculty member at Fuqua School 1991-97, and currently teaches at MIT’s Sloan School of Management.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business.
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