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| 49-6994 | HB3717 | 2011-24456 CIP | | Social & Behavioral Sciences Economics | | Friedman, Jeffrey. Engineering the financial crisis: systemic risk and the failure of regulation, by Jeffrey Friedman and Wladimir Kraus. Pennsylvania, 2011. 210p bibl index afp ISBN 0-8122-4357-9, $45.00; ISBN 9780812243574, $45.00. Reviewed in 2012aug CHOICE. | | The latest financial crisis has generated a flood of books purporting to give the inside story of exactly why the crisis took place. This book is not just one more in the series. For anyone wanting to read only a single book about the crisis and its origins, this is the book to read. Friedman and Kraus state, “The informed public’s impressions of the crisis are based in part on journalists’ and scholars’ hasty pronouncements. These impressions have now hardened into convictions.” With that statement as a precursor, they proceed to examine many theories of how the crisis came about, discarding most. But they are particularly critical of regulators (not simply US regulators) who incentivized banks to become overly property focused (“everyone should own a home”). This led to some very shoddy decision making that is far too detailed in the book to be summarized here. While the book is quite derogatory toward economists, it should be noted that the dust jacket features a complimentary quote from Nobel laureate economist Vernon Smith, who clearly predicted that a bubble seemed to have formed in the housing market and that bubbles always burst. Not every economist was asleep at the switch. Summing Up: Essential. Academic, public, and professional economics collections. — B. P. Keating, University of Notre Dame |
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