The Bankers’ New Clothes
New bank failures have been a rude awakening for everyone who believed that the banking industry was reformed after the Global Financial Crisis—and that we’d never again have to choose between massive bailouts and financial havoc. The Bankers’ New Clothes uncovers just how little things have changed—and why banks are still so dangerous. Writing in clear language that anyone can understand, Anat Admati and Martin Hellwig debunk the false and misleading claims of bankers, regulators, politicians, academics, and others who oppose effective reform, and they explain how the banking system can be made safer and healthier. Thoroughly updated for a world where bank failures have made a dramatic return, this acclaimed and important book now features a new preface and four new chapters that expose the shortcomings of current policies and reveal how the dominance of banking even presents dangers to the rule of law and democracy itself.
Authors
Anat Admati
Reviews
Indispensable.
Crucial.
This is the second edition of the most original and important book to have emerged from the financial crisis of 2007-08
The most important [book] to emerge from the crisis. . . . The authors achieve three things. First, they explain basic financial theory with simple examples that any moderately numerate individual can understand. Second, they show that these basic ideas apply, with modest differences, also to banking. Finally, they prove that, in opposing them, bankers and their apologists have spun intellectual raiment as invisible as the emperor's new clothes. . . . Read this book. You will then understand the economics. Once you have done so, you will also appreciate that we have failed to remove the causes of the crisis. Further such crises will come.
Powerful. . . . The authors persuasively argue that the solution is higher levels of equity capital throughout the banking industry to offset the impact of the implied government protections against failure.
Excellent.
Ms. Admati and Mr. Hellwig, top-notch academic financial economists, do understand the complexities of banking, and they helpfully slice through the bankers' self-serving nonsense. Demolishing these fallacies is the central point of The Bankers' New Clothes.
An important new book called The Bankers' New Clothes . . . offers what the Dodd-Frank legislation mostly lacked: a simple and elegant solution to the problem of financial stability. [Admati and Hellwig] argue that banks should fund themselves with more equity and less debt—or, to put it bluntly, that banks should risk more of their own money, and less of everyone else's.
Insightful.
Important.
Anat Admati and Martin Hellwig convincingly make the case for much stronger and simpler borrowing limitations for banks.
In a year of important books about the recent economic crisis, the most important one told us simply how to stop the next one.
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