Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy

355 Pages·2009·11.77 MB·English

by  Barry Ritholtz

( c o n t i n u e d f r o m f r o n t f l a p ) RR $24.95 USA / $29.95 CAN
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taking that has pushed us to the brink. Ritholtz also Praise for
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takes some of the biggest Wall Street fi rms—along
BBAAIILLOOUUTT NNAATTIIOONN OO “Do you fi nd yourself wondering: How did we get
with their enablers, the ratings agencies—to task.
LL here? How did the United States of America get
Page by page, you’ll learn how the repeal of certain
TT into such a predicament whereby in one year, 2008,
regulations allowed banks to merge into unruly fi nancial
ZZ the fi nancial system nearly vaporized, the stock
behemoths, while unproven investment vehicles,
market crashed, real estate tanked, and major
including collateralized debt obligations (CDOs) and
credit default swaps (CDSs), wreaked havoc on both “ If you want to know how we got into this mess, then Ritholtz’s Bailout Nation is where corporations were being bailed out. . . .How did our
great country, a bastion of capitalism, devolve into a
the credit and housing markets. you should begin. He chronicled the collapse from the beginning with a rare clarity, and
Bailout Nation where the gains were privatized, but
that shines through in this book.”
the losses were socialized?”
The United States has abandoned its capitalist roots
—Chris Anderson, author of The Long Tail —From the Foreword by Bill Fleckenstein
and become a Bailout Nation. The implications of
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this are signifi cant and far-reaching. If you intend on
“O ne of the biggest myths of the great credit debacle of 2008 is that nobody saw it coming. In Bailout Nation, Barry Ritholtz, author of the popular
navigating today’s treacherous terrain, it would be wise
Bull. Barry Ritholtz did. In Bailout Nation, Ritholtz throws our current travails into AA fi nance blog www.ritholtz.com/blog/, deftly mixes
to understand how we got here and what you need to
fi nancial history with an insider’s knowledge of modern
get ahead. Scathing, but fair, Bailout Nation puts this historical relief. For those who want to know how we got to this miserable place—and
fi nance to reveal how we’ve arrived at one of the worst
fi nancial debacle in perspective—through discussions who want to have fun doing it—this is essential reading.” II
economic crises ever. Engaging and informative, this
of past miscues and an exploration of solutions being
—Daniel Gross, Newsweek and Slate LL book clearly shows how years of trying to control the
proposed—and offers a voice of reason during these
economy with easy money has fi nally caught up with
uncertain economic times.
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“ Highly entertaining rants against the stupidity of our biggest fi nancial institutions. the United States and how the government’s practice of
repeatedly rescuing Wall Street—as well as other industries
Ritholtz brings intelligence and moral outrage to this book.”
BARRY RITHOLTZ operates one of UU and organizations—has come back to bite them.
—Rex Nutting, MarketWatch
today’s most popular economic
Divided into fi ve compelling parts, this timely guide
blogs,www.ritholtz.com/blog/,
“ Nobody in the fi nancial punditry world has been ‘righter’ about the economic crisis TT opens with a brief history of bailouts, detailing their
which has received over 50 mil-
particular patterns and unintended consequences.
lion page views since launching. He unfolding than Barry. If there was such a thing as a fi nancial pundits Hall of Fame, he
From here, it quickly moves on to reveal the events,
is the CEO and Director of Equity
would have to be an inaugural inductee. Ignore Bailout Nation at your own peril.” NN individuals, and institutions that have shaped our
Research at FusionIQ, an online quantitative research
fi rm. He is a frequent guest on CNBC; a regular guest — Tobin Smith, founder, ChangeWave Research, current situation. You’ll see how various government
on Fast Money, Kudlow & Company, and Power and Contributing Market Analyst, Fox News interventions—in individual companies such as
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Lockheed during the 1970s, in specifi c sectors such
Lunch; and author of the popular “Apprenticed
as banking in the early 1990s, and eventually, entire
Investor” column at TheStreet.com. “B ailout Nation provides an easily understandable and vividly descriptive road map as
TT markets with the rescue of stocks in 2000—opened
to how our domestic economy got into the rut we are now in . . . It is a must-read for up a Pandora’s Box. You’ll also discover how the
Jacket Design and Illustration: © John Sherffius serious students of fi nancial history . . . and for all investors in bonds and stocks who II misguided philosophies of many players, from Fed
Chairmen and Presidents to Senators and Treasury
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want to preserve and grow their capital in the future!”
Secretaries, promoted the massive meltdown that has
—Doug Kass, Seabreeze Partners, Real Money.com, CNBC engulfed our global economy.
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Ritholtz leaves no stone unturned, as he breaks down
how the Federal Reserve’s interest-rate targeting
policies as well as a condition known as moral hazard—
the belief that you won’t bear the full consequences of
your actions—perpetuated the reckless fi nancial risk
( c o n t i n u e d o n b a c k f l a p )
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Praise for Bailout Nation
“The greatest economic calamity in a generation has now swept from
Wall Street through Main Street, to Iceland, Europe, and beyond.
Barry Ritholtz not only saw the financial tidal wave coming, but tried
to warn us before it hit, when few believed anything like it could
happen. Now that clean-up is at hand, who better to explain what
went wrong? Read this book: when Barry Ritholtz speaks, as the
saying goes, attention must be paid.”
—Jeff Matthews
Author, Pilgrimage to Warren Buffett’s Omaha
“This thrilling page-turner is really a doctoral thesis in disguise on the
history of financial debacles and the inner workings of the global
financial system and modern economics. Barry is truly one of Wall
Street’s important thinkers and rising stars. Bravo Barry!”
—Jeffrey A. Hirsch
Editor-in-Chief, Stock Trader’s Almanac
“Barry Ritholtz, long known to readers of The Big Picture for telling it
like it is, does exactly that in Bailout Nation. With sparkling clarity and
his inimitable brashness, Barry names names and tells you where to
look for the bodies who are profiting from the unprecedented $8
trillion government bailout.”
—Michelle Leder
Author, Financial Fine Print and Footnoted
“Part history lesson, part social commentary, part in-depth analysis,
Bailout Nation serves up a riveting indictment of the age of hubris and
excess.”
—Michael Panzner
Financial Armageddon
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“As Wall Street wizards were turning into welfare kings, Barry Ritholtz
was there to chronicle every new outrage on his blog, The Big Picture.
Now he’s focused on the really Big Picture—how we got into this
mess—with his great new book, Bailout Nation.”
—Jesse Eisinger
Portfolio
“Barry Ritholtz crystallizes the absurdity of the bailouts and why
America’s addiction to them is doomed to fail. This should be required
reading for every future politician with a conscience.”
—Herb Greenberg
former journalist, CNBC, Marketwatch, and now
director of GreebergMeritz Research & Analytics
“Barry Ritholtz is leading the first wave of critical analysts who are
trying to make sense of the past year beyond the official explanations.
He not only illustrates the conflicts and contradiction in current
economic leaders and policies, but suggests some solutions and even
opportunities in this sea of global financial misery. I’m already looking
forward to volume two.”
—Christopher Whalen
Institutional Risk Analytics
“Bailout Nation provides a timely review and analysis of the issues and
problems that led to and are evidenced in the present financial turmoil.
These forensics are much needed today.”
—David Kotok
Cumberland Advisors
“Barry Ritholtz has a one-two combination punch of insight and
skepticism that leaves financiers, bankers and politicians out cold on
the floor. This is pungent and funny required reading about the
current crisis.”
—Dr. Paul Kedrosky
Infectious Greed
Partner, Ventures West VC
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Bailout Nation
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Bailout Nation
How Greed and Easy Money
Corrupted Wall Street and
Shook the World Economy
Barry Ritholtz
with
Aaron Task
John Wiley & Sons, Inc.
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Copyright(cid:1)C 2009byBarryRitholtz.Allrightsreserved.
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To Wendy,
who has bailed me out of more than a few jams
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