Bailout Nation: a Comedy

by francine Hardaway on January 29, 2010

So I'm listening to Barry Ritholtz's new book, "Bailout Nation," in my car. (Bless you, Audible). I'm laughing out loud. Barry is about the best financial writer I've read this year, and I've read plenty in my effort to understand how I came to lose my own financial security and almost everyone around me pretty much did the same.

Why am I laughing? Because Ritholtz combines a research guy's willingness to get into the history and causes of the current meltdown, player by player, and crazy financial product by financial product,  with documentation of the compensation all the C-level players receive for their part in bringing down their institutions (astronomical), and garnished with a smart New York Jewish guy's sarcastic sense of humor.

Mostly it's his choice of metaphor that gets me giggling. Here's how he explains why AIG was bailed out: compared to the other companies, AIG wasn't like the kid who pulls on the dog's tail, because that kid will get in trouble sooner or later, but will hurt only himself. And it wasn't like the kid who plays with matches and might burn the house down, and even the neighborhood. Rather, AIG was like the kid who got into the bio-tech weapons lab, saw the pretty colored vials, grabbed a handful of them and stuffed them into his pocket as he headed off to the playground.

Barry's tone, even more than his words, leads you to the conclusion that the people who led our financial system were totally incompetent, and bitten by the get-rich-quick examples of tech companies during the dot-com era. Those examples of young billionaires led bank CEOs to bet the house. And then he explains the difference between the failure of Wall Street firms and the failure of venture-funded companies in Silicon Valley:  venture capitalists are playing with high risk money that they and their investors know is high risk; Wall Street banks played with customers' retirement money, their homes –"their blood money." 

I've read "Too Big to Fail," by Andrew Ross Sorkin, and I've read David Faber's "And Then the Roof Caved In." But those guys are reporters, and they are, no matter how well-connected, on the outside. Ritzholtz actually works on the Street. He understands the "eat what you kill" mentality so pervasive in those fancy offices. And he understands why we, the taxpayers, now own so much of Citibank and AIG.

You might want to read this book. And then be careful where you put your money. The rating agencies, the mutual fund managers (who are paid to analyze investments), the regulators — none of them were on the ball. Next time some financial planner tells you what do do, maybe you should tell him where to go:-)

Posted via email from Not Really Stealthmode

{ 2 comments… read them below or add one }

aac74 January 31, 2010 at 8:31 am

Surely the symptoms of the disease are not really relevant. It's the root of the disease that needs to be investigated:

Greed is human nature and is not a problem. Everyone would like more than they have. Greed only becomes a problem when there is no consequence to reckless behaviour. The only entity that has the power to remove consequences (or a least create the illusion that there are no consequences) is government including the sham of the 'independent' central bank.

Are the bankers of Panama free of greed and other vices ? With no central bank it should be a permanent low interest rate lending party no ??? Maybe it's those pesky free market consequences ? It's almost like the free market is the most powerful 'regulator' you can have.

hardaway January 31, 2010 at 9:44 am

Ritholtz talks about reigning in the Fed a lot. And I agree. What the hell
is the Fed doing anyway?

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