What is wrong with today's banking system? The past few years have shown that risks in banking can impose significant costs on the economy. Many claim, however, that a safer banking system would require sacrificing lending and economic growth. "The Bankers' New Clothes" examines this claim and the narratives used by bankers, politicians, and regulators to rationalize the lack of reform, exposing them as invalid.
Admati and Hellwig argue we can have a safer and healthier banking system without sacrificing any of the benefits of the system, and at essentially no cost to society. They show that banks are as fragile as they are not because they must be, but because they want to be--and they get away with it. Whereas this situation benefits bankers, it distorts the economy and exposes the public to unnecessary risks. Weak regulation and ineffective enforcement allowed the buildup of risks that ushered in the financial crisis of 2007-2009. Much can be done to create a better system and prevent crises. Yet the lessons from the crisis have not been learned.
Admati and Hellwig seek to engage the broader public in the debate by cutting through the jargon of banking, clearing the fog of confusion, and presenting the issues in simple and accessible terms. "The Bankers' New Clothes" calls for ambitious reform and outlines specific and highly beneficial steps that can be taken immediately.
|Publisher:||Princeton Univ Pr|
|Publish Date:||Feb 2013|
|Number of Pages:||398|
|Shipping Weight (in pounds):||1.58|
|Product in Inches (L x W x H):||7.0 x 10.0 x 1.25|
|The Emperors of Banking Have No Clothes||p. 1|
|Borrowing, Banking, and Risk||p. 15|
|How Borrowing Magnifies Risk||p. 17|
|The Dark Side of Borrowing||p. 32|
|Is It Really "A Wonderful Life"?||p. 46|
|Banking Dominos||p. 60|
|The Case for More Bank Equity||p. 79|
|What Can Be Done?||p. 81|
|Is Equity Expensive?||p. 100|
|Paid to Gamble||p. 115|
|Sweet Subsidies||p. 129|
|Must Banks Borrow So Much?||p. 148|
|Moving Forward||p. 167|
|If Not Now, When?||p. 169|
|The Politics of Banking||p. 192|
|Other People's Money||p. 208|
Recent worldwide banking crises have forced governments to bail out and subsidize large banks because of what Admati (economics, Stanford Graduate Sch. of Business) characterizes as an ill-informed public perception that the institutions were too big to fail. Other misconceptions about the banking industry are addressed here as well, especially the false assumption that there is a tradeoff between banks' capital requirements and growth and profit. This book takes readers inside the global banking industry, examines the intricacies of banking operations, and addresses the major problems, including the banking system's overall "fragility". Macro solutions are offered that, the author maintains, will make the infrastructure more stable. Especially interesting is the discussion of how the current system rewards rather than penalizes risky decision making by individual bankers.
Verdict: This title is a must read for management and human resource professionals within the banking industry as well as government policy makers. With its clear explanations, many examples, and analogies, the book is accessible to readers who do not have business backgrounds and who want to better understand banking.
-Caroline Geck, Camden Street Sch. Lib., Newark, NJ
(c) Copyright 2013. Library Journals LLC, a wholly owned subsidiary of Media Source, Inc. No redistribution permitted.
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