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 / Winter 2009 / Issue 57(originally published by Booz & Company)


Best Business Books 2009: The Meltdown

A Wealth of Explanations

David Wessel
In Fed We Trust: Ben Bernanke’s War on the Great Panic
(Crown Business, 2009)

Mark Zandi
Financial Shock: Global Panic and Government Bailouts — How We Got Here and What Must Be Done to Fix It
(2nd ed., FT Press, 2009)

John B. Taylor
Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis
(Hoover Institution Press, 2009)

Gillian Tett
Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe
(Free Press, 2009)

William D. Cohan
House of Cards: A Tale of Hubris and Wretched Excess on Wall Street
(Doubleday, 2009)

Richard A. Posner
A Failure of Capitalism: The Crisis of ’08 and the Descent into Depression
(Harvard University Press, 2009)

Gerald F. Davis
Managed by the Markets: How Finance Re-Shaped America
(Oxford University Press, 2009)

The definitive account of the financial meltdown of 2008–09 has not been written, and cannot be just yet because the story is unfinished. A degree of stability returned to financial markets this summer, but the system is still stressed and nobody can be sure what will happen next. The broader economy shows signs of recovery, but unemployment is high and likely to rise further, a prospect with political and economic implications still unknown.

By the autumn of 2009, only a small part of the huge fiscal stimulus deployed against the downturn in the U.S. had made itself felt. In monetary policy, the Federal Reserve and its counterparts intervened to support the banking and credit systems in new ways and on a wholly unprecedented scale. To call these interventions “unfinished business” would be putting it mildly. Meanwhile, not just the future is uncertain. The next surprise could change our understanding of what has happened so far, as earlier shocks already have.

Never mind: A crop of new books on the subject has already come to market. All were written under the pressure of short deadlines and fast-changing circumstances — and, as you might expect, many were worthless on arrival. But there are some splendid exceptions. The best books from this first crop are fine by any standard.

Among the successful books, the range of explanations for the crisis is wide. Some focus on economic policy, others on closely reported tales of greed and fallibility. One locates the root cause in the triumph of finance over manufacturing in the United States. Another asks whether capitalism itself stands condemned. Just as the crisis had no single source, there is no single way to best tell what happened. This makes it hard to say which book is best. Nonetheless, if forced to choose just one, I would pick David Wessel’s In Fed We Trust: Ben Bernanke’s War on the Panic — an excellent work on a crucial aspect of the story, and one that addresses my professional interest in economic policy.

The Fed’s-Eye View

Wessel, the Wall Street Journal’s economics editor, tells the story from the point of view of policymakers in the Department of the Treasury and the Federal Reserve, and especially that of Ben Bernanke, the Fed’s chairman. The book is beautifully written and a gripping read throughout. Although Wessel provides enough context to make the crush of events intelligible, unraveling causes is not his main concern. In Fed We Trust is about how the key officials coped, usually none too confidently, with the torrent of disasters that began in 2008. The cast includes Bernanke; Henry Paulson, who was Treasury secretary in the Bush administration when the crisis broke; Timothy Geithner, president of the Federal Reserve Bank of New York when the emergency started and now Barack Obama’s Treasury secretary; and many others in cameo roles.

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