Free Lunch
Author: David Kay Johnston 2007 293 pp
My rating: 3*
Started December 31 2008, Finished January 7 2009.
While this book’s accounts of how the wealthiest Americans enrich themselves at the expense of the rest of us is nearly guaranteed to outrage the reader, and while I often reacted that way to tales of, say, how George W Bush made his fortune almost entirely through tax breaks that were only available to him and his fellow owners of the Texas Rangers, much of the indignation I felt while reading this was at the book itself which I found a pretty slapdash affair, anecdotal and weakly sourced. I was expected the book would reveal a systematic assortment of recently enacted policies designed to transfer wealth to the wealthy and which could be reasonably remedied, but instead the examples it provides cover such a broad range from state business incentives, quirks of municipal laws, lack of federal regulation and even court interpretation of existing laws that the conclusion I was left with is that of course the system isn’t perfect.
Chapter One, the introduction, felt unfocused, wandering and extemporaneous.
Chapter Four doesn’t demonstrate that US government policies are responsible for job migration overseas.
Chapter on home security claims that the local police force responds to home security alarms; this is contrary to my experience which is that home security companies have their own agents.
Chapter on title insurance states that Iowa has a unique system which is “better and cheaper” but the rate he lists for title insurance in that state is more than I paid for the title insurance on my house.
Chapter 18, on the west coast electricity crisis of a few years back stirs outrage which is undercut but its simplistic inference that market manipulation by Enron was fully responsible for the crisis.
Chapter 21, a summary of the deficiencies of the US health care system (which the author points out exists as a business, not a service, contrary to most other first world countries) is concise and effective.
Chapter 22 is 20 pages long and filled with factual assertions, yet has only three foot notes.
Cites Alpha magazine as reporting that in 2006, the top 25 hedge fund managers averages $570 million in salary. (246)
Thursday, January 15, 2009
Friday, January 9, 2009
The Trillion Dollar Meltdown
The Trillion Dollar Meltdown
Author: Charles R Morris 2008 169 pp
My rating: 4*
Started December 18 2008, Finished December 22 2008.
A concise and convincing explanation of the credit crisis that precipitated our current economic woes and a good primer on things like CMOs and CDOs. This book which blames the crisis on deregulation and prolonged easy credit gets points for prescience as it was written in November of 2007, well before the shocks of September 2008 when the extent of the financial rot became apparent to most of us. Note on the severity of the crisis: the author has written a new edition scheduled to be published in February of 2009; that edition is going to be entitled The Two Trillion Dollar Meltdown.
“ … relative values funds ‘eat like chickens, shit like elephants.” (50)
“The relentless deregulation drive that started during the Reagan administration steadily shifted lending activities to the purview of nonregulated entities, until by 2006, only about a quarter of all lending occurred in regulated sectors, down from about 80 percent twenty years before.” (54)
William McChesney Martin, Chairman of the Federal Reserve for eighteen years from Truman through Nixon, “The function of the Federal Reserve is to take away the punch bowl just as the party is getting good.” (62)
“Refis jumped from $14 billion in 1995 to nearly a quarter-trillion in 2005, the great majority of them resulting in higher loan amounts. (67)
Suprime lending jumped from an annual volume of $145 billion in 2001 to $624 billion in 2005, more than 20 percent of total issuances. More than a third of subprime loans were for 100 percent of the home value -- even more when the fees were added in. (69)
The notional value of credit default swaps -- that is the size of portfolios covered by credit default agreements -- grew from $1 trillion in 2001 to $45 trillion by mid-2007. (75)
Almost all the top one-tenth’s share gains, in other words went to the top 1 percent, or the top ‘centile’ who doubled their share of the national cash income from 9 percent to 19 percent. (140)
It is the transparency and integrity of American financial markets that has made them such a magnet for foreign investment … (161)
Author: Charles R Morris 2008 169 pp
My rating: 4*
Started December 18 2008, Finished December 22 2008.
A concise and convincing explanation of the credit crisis that precipitated our current economic woes and a good primer on things like CMOs and CDOs. This book which blames the crisis on deregulation and prolonged easy credit gets points for prescience as it was written in November of 2007, well before the shocks of September 2008 when the extent of the financial rot became apparent to most of us. Note on the severity of the crisis: the author has written a new edition scheduled to be published in February of 2009; that edition is going to be entitled The Two Trillion Dollar Meltdown.
“ … relative values funds ‘eat like chickens, shit like elephants.” (50)
“The relentless deregulation drive that started during the Reagan administration steadily shifted lending activities to the purview of nonregulated entities, until by 2006, only about a quarter of all lending occurred in regulated sectors, down from about 80 percent twenty years before.” (54)
William McChesney Martin, Chairman of the Federal Reserve for eighteen years from Truman through Nixon, “The function of the Federal Reserve is to take away the punch bowl just as the party is getting good.” (62)
“Refis jumped from $14 billion in 1995 to nearly a quarter-trillion in 2005, the great majority of them resulting in higher loan amounts. (67)
Suprime lending jumped from an annual volume of $145 billion in 2001 to $624 billion in 2005, more than 20 percent of total issuances. More than a third of subprime loans were for 100 percent of the home value -- even more when the fees were added in. (69)
The notional value of credit default swaps -- that is the size of portfolios covered by credit default agreements -- grew from $1 trillion in 2001 to $45 trillion by mid-2007. (75)
Almost all the top one-tenth’s share gains, in other words went to the top 1 percent, or the top ‘centile’ who doubled their share of the national cash income from 9 percent to 19 percent. (140)
It is the transparency and integrity of American financial markets that has made them such a magnet for foreign investment … (161)
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