I originally picked this book up because of a quote Matt Taibbi included in his blog:
Here are some numbers for you. There were approximtely $1.4 trillion worth of subprime loans outstanding in the United States by the end of 2007. By the first quarter of 2009, there were forclosure filings against approximately 4.4 million properties. If it was only the subprime market's fault, $1.4 trillion would have covered the entire problem, right?
Yet the Federal Reserve, the treasury, and the FDIC forked out $13 trillion to fix the housing “correction”… With all that money, the government could have bought up every residential mortgage in the country – there were about $11.9 trillion worth at the end of December 2008 – and still have had about a trillion left over to buy homes for every American who couldn’t afford them.
So the next time someone says the financial meltdown was caused by irresponsible poor people who took out loans they could never afford to repay I want you to think about that quote. Subprime mortgages may have been the catalyst, but they were definitely not the root cause. (That would be leveraging, among other things. But it's totally okay when a company borrows more money than it could repay in order to gamble. It's just when people do it that it's a problem).
The other reason I wanted to pick up this book was so that I could understand how the bailout was actually disbursed. The book helped with that. Prins tried not to be too technical and explained terms of art but there were still times I found it incredibly dry and difficult to follow.
I would have really benefited from a Dramatis Personae with a brief listing of relevant occupations held and how that player was tied to Goldman Sachs. (All or nearly all the major players were tied to Goldman in some way. Either they worked for Goldman directly or were mentored by someone who did).
After reading this book I am reluctantly forced to conclude that if you want to blame an administration for the 2008 collapse you need to look to Clinton, not George W. Bush. It was under Clinton that Glass-Steagal was gleefully repealed. His administration also helped to end other important regulations, but Glass-Steagal was the most important. (And the fact that it hasn't been reimplemented is all you need to know about how serious the current Congress and administration is about actually fixing the problem and making sure it doesn't happen again).
I've also come to feel that while I certainly blame Wall Street for what happened, I blame Congress and the President (from Reagan to Obama) even more.
Bankers are supposed to make money. They know they can ignore the rules with impunity. For some insane reason, they do not have a fiduciary duty to their clients, only to their shareholders. (The reason they don't have a fiduciary duty to their clients is no doubt because it would conflict with their fiduciary duty to their shareholders). Their job is basically to exploit the system however they can.
It's the job of Congress and the President to protect the American people (and by extension, the rest of the world) from the predatory nature of big banks. They are the ones who make and enforce regulations. On this count they have failed catastrophically and, sadly, continue to fail.
Congress has allowed every single surviving major bank to get substantially bigger since 2008. If they were "too big to fail" then, what the hell are they now?
Prins ends the book with some recommendations on how to fix the mess we're in. She believes we need to freeze the banks and completely restructure them, just as FDR did. I believe she is correct that it is the only way we can prevent this from happening again and I'm equally convinced it will never happen.
She ends by telling people to write their Congressmen and women. She has more faith in the system than I. I believe that we could start with a completely fresh slate for the next elections and by the time people were elected the banks would have bought enough of them (via campaign donations and third party ads, etc) to guarantee that no meaningful reform would take place.