Firefighting

February 15, 2019
Three principal policymakers and "firefighters" during the 2008 financial crash describe the crisis and suggest policies to prepare for an inevitable return.The fire metaphors flare brightly in the first half of this brief, cogent account of the near collapse of the American economy near the end of the presidency of George W. Bush and the beginning of Barack Obama's. Bernanke (The Courage to Act, 2015, etc.), Geithner (Stress Test, 2014), and Paulson Jr. (Dealing with China, 2015, etc.) mention themselves by first name throughout (Ben, Tim, Hank) and are occasionally heavy on self-congratulation, but they also express humility. For example, they note how a Geithner speech, intended to calm markets and investors, had the opposite effect. The authors are also generally nonpartisan, though several times they allude to the dangers of today's "bitterly polarized politics," and they praise Obama more than those on the right will probably enjoy. They also respond several times to critics from a decade ago who assailed them for saving Wall Street and largely ignoring Main Street. The authors' approach is straightforward and easy to digest: Describe what caused the collapse; tell about the measures the government took to contain it; comment on what worked and what didn't; discuss the fallout; speculate about what needs to be done now. They take care to clarify such terms as "derivatives" and "leverage" so that readers unclear about them (and numerous others) can easily follow the text. They are admonitory toward the end, reminding us of a truth that applies not just in the financial-crisis world: "The enemy is forgetting." The authors--each of whom has published a memoir about the crisis--are not especially memorable stylists, too often relying on clichés--e.g., "fallen through the cracks," "get ahead of the curve."A clear, concise account illustrating why financial fires must be anticipated if they're to be controlled.

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Starred review from April 1, 2019

Key U.S. government policymakers during the 2008 financial crisis, Bernanke (The Courage To Act), Tim Geithner (Stress Test), and Hank Paulson (On the Brink) follow up their individual memoirs with this work discussing their collaboration and lessons learned along the way. The authors use the analogy of fires and firefighting to describe how financial crises arise and are suppressed. According to the authors, the crisis's tinder included easy credit, market overconfidence, shadow banking, opaque mortgage securitization, excessive leverage, and fragmentary regulation. They recount how the sparks from subprime defaults created panic that spread out of control, threatening one financial institution after another. Ending the fear and preventing a depression was very difficult within the context of the regulatory limits and political atmosphere. Postcrisis reforms, they warn, strengthened safeguards to prevent another crisis but weakened the tools needed to deal with one. VERDICT All kinds of readers will find this work a readable summary of the crisis, but its paramount value comes from the authors' explanations and defenses of their whatever-it-takes actions and assessment of current financial system risks. A complementary account is Andrew Sorkin's riveting Too Big To Fail.--Lawrence Maxted, Gannon Univ. Lib., Erie, PA

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