A Conscious Conservative Book Review : 13 Bankers

13 Bankers: The Wall Street Takeover and the Next Financial Meltdown

BY SIMON JOHNSON and JAMES KWAK

In the book 13 bankers, Johnson and Kwak explain the relationship between Washington D.C. and Wall Street.  They also analyze the mortgage crisis and tie it to the United States' recent economic troubles.  In the end they state that nothing has fundamentally changed and may have gotten worse since TARP and other bailouts.  They then give their recommendations for what should happen to avert economic crises in the future.  

The title of this book is taken from a meeting held at the White House on March 27,  2009.  In attendance were the heads of thirteen major U.S. banks. A main theme of this book is how bureaucrats, executives of major banks and members of the Federal Reserve float in and out of positions at each others' organizations creating an impression of incestuous relationships and a good ol' boy network that determines much of the regulatory and financial structure of banks in the United States.  This book does a good job of showing how people move from the positions of executive to government official to cabinet member and back to executive again.

This book also does a good job of analyzing the mortgage mess.  A review of comments on Amazon.com shows that some said Johnson and Kwak's explanation was too complicated and some said it was too simple.  That makes me think it was just right.  I never quite understood credit default swaps and collateralized debt obligations from reading the popular.press.  This book seemed to make it clear.  The only objection is that they overemphasized the effects of deregulation on the markets and did not talk enough about government programs designed to give loans to people who couldn't afford houses contributed to bank insolvency.

The authors state that for all of the chest beating done in Washington, D.C., several years has gone by and nothing has fundamentally changed.  President Obama is still meeting with bankers in the White House and certain banks are considered "too big to fail," no matter how much they mess up.  Johnson and Kwak emphasize more regulation and nationalization.  I disagree with this.  I believe what is needed is elimination of barriers to entry in the banking system, accountability for individual executives within the large banks and abolition of Fannie Mae, Freddie Mac and the Federal Reserve.

I recommend reading this book due to the good job which Johnson and Kwak do of explaining the mortgage mess and the relationship between Washington, D.C. and Wall Street.