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The Financial Crisis and the Free Market Cure: Why Pure Capitalism is the World Economy's Only Hope Hardcover – September 27, 2012
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The #1 Wall Street Journal Bestseller
“Required reading. . . . Shows how our economic crisis was a failure, not of the free market, but of government.”
―Charles Koch, Chairman and CEO, Koch Industries, Inc.
“The Financial Crisis and the Free Market Cure is a sophisticated yet accessible analysis of the causes and solutions to America’s financial meltdown.”
―Ed Crane, President Emeritus of the Cato Institute
“An indispensable contribution to the debate about the future of the American economy.”
―Arthur Brooks, President, American Enterprise Institute
“No one is better equipped to understand what is going on today and the causes of the financial crisis. Please pay attention to what he says here.”
―Bernie Marcus, Chairman, The Marcus Foundation, and cofounder, Home Depot
“Allison explains the unintended consequences of government policies and their impact on the financial crisis . . . and recommends practical steps to improve the economy and individual liberty.”
―James M. Kilts, former Chairman and CEO, Gillette Company
“[This is] the best, deepest explanation of what caused the crisis and the consequences of our government’s response to it.”
―Yaron Brook, President and Executive Director, Ayn Rand Institute
“John Allison is superb with his comprehensive and thought-provoking explanation for our current economic crisis and a clear and compelling path to a brighter future.”
―Steve Reinemund, Dean, Wake Forest University Schools of Business, and retired Chairman and CEO, PepsiCo
“[John Allison] assembles evidence that shows that our financial crisis, followed by the Great Recession, was caused by Congress, the Federal Reserve, Freddie Mac, and Fannie Mae, and was helped along by the Bill Clinton, George W. Bush, and Barack Obama White Houses.”
―Walter E. Williams, syndicated coumnist
Did Wall Street cause the mess we are in? Should Washington place stronger regulations on the entire financial industry? Can we lower unemployment rates by controlling the free market?
The answer is NO.
Not only is free market capitalism good for the economy, says industry expert John Allison, it is our only hope for recovery. As the nation’s longest-serving CEO of a top-25 financial institution, Allison has had a unique inside view of the events leading up to the financial crisis. He has seen the direct effect of government incentives on the real estate market. He has seen how government regulations only make matters worse.
And now, in this controversial wake-up call of a book, he has given us a solution. The national bestselling The Financial Crisis and the Free Market Cure reveals:
- Why regulation is bad for the market―and for the world
- What we can do to promote a healthy free market
- How we can help end unemployment in America
- The truth about TARP and the bailouts
- How Washington can help Wall Street build a better future for everyone
With shrewd insight, alarming insider details, and practical advice for today’s leaders, this electrifying analysis is nothing less than a call to arms for a nation on the brink. You’ll learn how government incentives helped blow up the real estate bubble to unsustainable proportions, how financial tools such as derivatives have been wrongly blamed for the crash, and how Congress fails to understand it should not try to control the market―and then completely mismanages it when it tries. In the end, you’ll understand why it’s so important to put “free” back in free market.
It’s time for America to accept the truth: the government can’t fix the economy because the government wrecked the economy. This book gives us the tools, the inspiration―and the cure.
- Print length288 pages
- LanguageEnglish
- PublisherMcGraw Hill
- Publication dateSeptember 27, 2012
- Dimensions6.3 x 1.1 x 9.2 inches
- ISBN-100071806776
- ISBN-13978-0071806770
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Amazon Exclusive: Post-Election Commentary from Author John A. Allison
The 2012 election has reinforced for me that the U.S. has a simple choice – return to the principles that made us great or face economic decay and social unrest. One of the reasons I wrote my book is because it seemed to make sense to have someone who had an inside and comprehensive understanding of the causes of our financial problems to comment on the issue. In the aftermath of the recent election, it’s even more important for the public and policy makers to understand what drove the financial crisis and what choices we must make to revitalize our economy.
The media and other statists have created a myth that the financial crisis was caused by banking deregulation and greed on Wall Street. However, banks were not deregulated. In fact, three major new regulations were passes during the Bush Administration: The Privacy Act, The Patriot Act, and Sarbanes-Oxley. Banks were misregulated, not deregulated. Also, there has always been plenty of greed (and fear) on Wall Street. However, there is not one shred of evidence there was a greed plague that swept the Street.
The financial crisis and failed recovery were primarily caused by government policy. The two main culprits were errors made by the Federal Reserve and government housing policy, specifically as executed by Freddie Mac and Fannie Mae, the giant government-sponsored enterprises that would never have existed in a free market.
My book, The Financial Crisis and The Free Market Cure covers this and other economic myths and misunderstanding such as the “shadow” banking system, fair value accounting, Pick-a-Payment mortgages and the like. However, as interesting as the economic discussion is, the real solution for our financial problems is philosophical and the cure was espoused by Thomas Jefferson in the Declaration of Independence: “Life, Liberty, and the Pursuit of Happiness.”
People on all sides of the political spectrum defend liberty, but few people understand why liberty is essential to human well-being. Government regulations put “balls and chains” on innovators and entrepreneurs and thereby, slow and eventually stop progress. Given man’s nature, socialism and communism are doomed to failure.
So, again, I say, the US has a simple choice: The laws of mother nature and human nature are not subject to popularity or political whim. Capitalism or decline. You choose.
About the Author
John A. Allison is the longest-serving CEO of a top-25 financial institution, having served as Chairman of BB&T for twenty years. He currently serves as President and CEO of the Cato Institute and as a distinguished professor at the Wake Forest University Schools of Business. He is also one of the lead spokespersons for banking and policy reform today, appearing at universities and business groups nationwide and serving on the board of directors of the Ayn Rand Institute. He received a Lifetime Achievement Award from American Banker and was named one of the decade’s top 100 most successful CEOs by Harvard Business Review.
Product details
- Publisher : McGraw Hill; 1st edition (September 27, 2012)
- Language : English
- Hardcover : 288 pages
- ISBN-10 : 0071806776
- ISBN-13 : 978-0071806770
- Item Weight : 1.23 pounds
- Dimensions : 6.3 x 1.1 x 9.2 inches
- Best Sellers Rank: #804,363 in Books (See Top 100 in Books)
- #406 in Free Enterprise & Capitalism
- #784 in Theory of Economics
- #1,656 in Economic History (Books)
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Although I had a couple of minor issues with the book (being not a financial person myself, a little bit better explanation of certain financial terms would have been nice in a couple of places, and there were a number of typos), overall I was extremely impressed with Allison's clear explanations of various aspects of the financial industry, including the use of good, simple metaphors to help concretize complex issues or aspects of the industry that are on a scale too large to easily contemplate without financial expertise.
Furthermore, he digs very deeply not just into the proximate causes of the financial crisis (the "housing bubble," a massive misallocation of money encouraged by Federal Reserve monetary policy and political incentives pushing home ownership), but also into the deeper underlying economic problems that government agencies and policies represent (such as the impossibility of the sort of currency manipulation that the Federal Reserve attempts to do, the inevitable and damaging inflation that necessarily results, the monopolizing effect of agencies such as Fannie Mae and Freddie Mac, etc.). Allison shows clearly why it is not just that the current political and bureaucratic actors in these agencies made poor decisions (which they did), but that no one in any sort of "centralized control" position in an economy can ever make correct or good decisions - there is simply no way that one person, or one group of people, can make economic and financial decisions which actually need to be made by every single individual who is in any way part of the economy. Allison also hits very hard against the idea of any company being "too big to fail," pointing out that in fact the bigger a company is, the more important it is to allow it to fail if it does poorly, so that the people and resources of that company can be re-allocated and reinvested into parts of the economy where they will actually do some good.
One aspect of the book that I especially liked were his points about incentives and human action. While laying blame on both government actors and the management/employees of various companies where it is due, he is also careful to point out the reasons why a certain CEO acted in a certain way even though it was harmful to his company in the long-term, and why a political appointee or a lifetime bureaucrat are going to have incentives that are necessarily in conflict with individuals trying to act in a market economy. He explains, often in detail, how various government regulations that are supposed to make the economy "safer" and more stable in fact have the exact opposite affect; by providing a "safety net," companies are in fact incentivized to take on more risk, rather than less, and it is U.S. taxpayers who then have to bear the burden when inevitably that risk-taking (which would not have happened in a truly free market) has negative consequences.
Lastly, Allison takes his analysis one level deeper, and looks at the underlying philosophical premises in our culture today that encourage government intervention in the economy despite its proven negative consequences, and the philosophical ideas that we will need to learn (or in some cases relearn) in order to move towards a freer and more stable economy. His treatment of these issues is perhaps somewhat brief, but fits well into the context of the book, and he provides clear suggestions of further sources for a more in-depth look at the connection between philosophical and political/economic ideas.
I enjoyed this book a great deal, and I definitely learned a lot. I would recommend it to anyone interested in the financial crisis and the economic, political and philosophical issues surrounding it, especially if you are looking for the views of a knowledgeable and qualified insider, and a very non-mainstream point-of-view.
This book, written by the former chairman of one of the larger and most successful regional banks, digs down and explains the root causes of the financial crisis -- and how Federal housing policies coupled with a credulous Congress assisted by useless regulators and boosted by an out-of-control Federal Reserve manage to bring the economy of the United States into a serious crash.
This is NOT a partisan book, as politicians from both the Democratic and Republican party have their fingerprints all over the problems that they, together, created. This was not a matter of "greedy bankers or investors" but rather it was homebuyers, lenders, banks, investors, and insurance companies following the incentives established by the political elite and exacerbated by rules established by regulators -- following political directives that did not comport with setting reasonable levels of risk.
While this book does get somewhat technical at times, it is still relatively easy to read and you can follow the trail of the breakdown easily through the thicket of rules, regulations, and interference by politicians and bureaucrats (with outside pressure groups further pushing us toward financial disaster). I give high marks to the author for keeping a focus on basic principles of moral behavior while it seemed as if the whole world was caught up in "can't lose" financial manipulations.
Well worth reading.
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I used it a lot for for uni studies too. His view has tremendous weight.
This is a very comprehensive account of how government regulations and incentives imposed on US banks caused a massive misallocation and redistribution of wealth culminating in the 2008 Financial Crisis. John Allison provides a wide-angle systemic view that illustrates how short-sighted bureacratic interventions distort and corrupt what would otherwise be a productive, self-correcting market economy. He takes you through the short- and long-term consequences of government interference from an insider's---a CEO's---first-hand perspective.
What I also loved about this book is that the author provides positive, well thought out, and principled recommendations on how America can transition from an economy crippled by an increasingly destructive welfare state to a moral and productive economy with limited government. Highly recommended! This book should be part of the curriculum in colleges and universities.
It especially elucidates the numerous examples of the workings of the unfortunate law of unintended consequences. This is, of course, absolutely essential if we hope to do better in future.
I would very much recommend reading this book and making it a priority over many others to anyone who is searching to understand how our society works.