Do we really need another book about the US financial crisis? The economist Alan Blinder certainly thinks so. In his latest book he says "the American people still don't quite know what hit them".
Part of the problem, as he sees it, is that the Obama administration has done such a terrible job explaining things to voters. He's right about that, and he proves adept at doing the explaining himself, making accessible the complex events leading to the crisis and the ways in which policymakers responded.
A former economic adviser in the Clinton administration and ex-vice chairman of the Federal Reserve, Blinder is good at providing political context. Unlike some post-crash commentators, he doesn't unburden himself of utopian proposals that have no more chance of adoption than Greece has of paying off its debts. If anything, Blinder is all too conscious of how Washington works, and this is one of the most dispiriting aspects of the book.
Given his understanding of the dismal realities, Blinder thinks Uncle Sam did surprisingly well in coping with the crisis, and his book is an extended – and reasonably persuasive – apologia for the bailouts, the Fed's unprecedented interventions and even the Dodd-Frank reforms aimed at making a replay of the crisis less likely.
Yet at times the author is too circumspect. He seems to think letting Lehman Brothers fail in disorderly fashion was a terrible idea, but he never really comes out and says so. He cites inadequate regulation as a factor leading to the crisis, but lets Fed chairman Ben Bernanke (a member of the Fed's board of governors from 2002 to 2005) off easy in this connection.
Indeed, the book must be read in the context of Blinder's friendship with Bernanke, his former Princeton University colleague, who is thanked in the preface.
Memories are short, he reminds us, which is why it's important to recall the abject panic of 2008. In Blinder's view, there's little doubt that if Washington hadn't propped up financial institutions, ended the run on money-market funds and pumped money into the economy to prevent even more joblessness, the dismal recession would have been much, much worse.
But there isn't much that's new for crisis sophisticates.
Lay readers, for their part, will wish the book were shorter, and will occasionally be flummoxed by the references to balance sheets and the like. But every reader should come away with a sense of optimism. Blinder makes a good case that, in the face of catastrophe, public officials acted boldly, creatively and effectively.
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