CRF Blog

13 Bankers

by Bill Hayes

Simon Johnson and James Kwak in 13 Bankers: The Wall Street Takeover and the Next Financial Meltdown look at the historic struggle between bankers and those who have sought to regulate them. The book’s title refers to the CEOs of the 13 largest banks who met with President Obama in March 2009. The book argues that much greater regulation of banks is needed or another crisis will come. From the review in the New York Times Book Review:

To put it bluntly, as this book does: the efficient-market hypothesis does not work. It never has. Markets are not self-correcting. Left to their own devices, bankers at the biggest institutions can’t seem to stop themselves from speculating with borrowed money until they inevitably crash the system.

Johnson, a professor of entrepreneurship at M.I.T.’s Sloan School of Management, and Kwak, a former consultant for -McKinsey & Company, tell this story in matter-of-fact prose. Even their discussion of derivatives is accessible to ordinary readers (most of the time). Their conclusion: during only one period over the past two centuries was government regulation sufficiently restrictive to rein in Wall Street and the bankers. “The result,” they say, “was the safest banking system that America has known in its history.” Johnson and Kwak are referring to the 50 years from the 1930s through the 1970s.

An excerpt from the book.