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5 of 5 people found the following review helpful
4.0 out of 5 stars 38 suspects and no-one to blame
The way that Howard Davies describes the financial crisis, MaCavity must have caused it. One by one he exonerates the 38 potential culprits he identifies and can come up with no better conclusion than it was basically the fault of the politicians. (He comes close to contradicting himself over 'light touch regulation' in this regard). Davies describes the work as...
Published on 23 Aug 2011 by Barton Keyes

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7 of 9 people found the following review helpful
3.0 out of 5 stars Thorough examination of the causes of the crisis
You might find this a tough read. I had a semester of university economics, and I'm a bit of a news addict - I was only just hanging on. If you've no serious economics background you will find this impossibly tough in places.
Having said that, I found the analysis thorough, written in short, punchy chapters, and structured so as to walk you through all the various...
Published on 27 Mar 2011 by Andrew Sillis


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5 of 5 people found the following review helpful
4.0 out of 5 stars 38 suspects and no-one to blame, 23 Aug 2011
This review is from: The Financial Crisis - Who is to blame ? (Paperback)
The way that Howard Davies describes the financial crisis, MaCavity must have caused it. One by one he exonerates the 38 potential culprits he identifies and can come up with no better conclusion than it was basically the fault of the politicians. (He comes close to contradicting himself over 'light touch regulation' in this regard). Davies describes the work as "opinionated" in the summary chapter but a little more willingness to come to a conclusive view would have been welcome. Perhaps he wished to avoid the obvious conclusion of the books title -- although the graphic designer has done his best with the layout to avoid the obvious jibe: The Financial Crisis: Who is to Blame? Howard Davies.

Davies also has a touching faith that the best guarantee of financial stability was that bankers had the interest of their shareholders at heart -- this belief is hard to sustain when the calamitous record of British bankers' overseas adventurism is scrutinised: Crocker (Midland); First Jersey National (NatWest); Household (HSBC); AMRO (NatWest again). Or when Loyd Blankstein opines that -- forget the shareholders -- he is "doing God's work"

But for all its failure to finger a particular perpetrator, this book is a very useful, concise and informed review of the myriad causes of the problem; engagingly and interestingly written it avoids jargon ( for the most part -- although the editor commits a howler on p189) and obscurity and sets out the facts very well. Unfortunately it misses the target it sets itself in the title.
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1 of 1 people found the following review helpful
4.0 out of 5 stars The Financial Crisis for the Layman, 19 Mar 2011
By 
Brian R. Martin (London, UK) - See all my reviews
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This review is from: The Financial Crisis - Who is to blame ? (Paperback)
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The financial crisis that began in 2007, triggered by the sub-prime mortgage market in the USA, was the worst for eighty years and has resulted in far-reaching consequences for the global economic that still continue. Not surprisingly, this has generated considerable activity in economic and political circles aimed at investigating the causes of the disaster and, for some, identifying the culprits. About the only thing that economists agree on is the key importance of high levels of leverage, at both personal and corporate level. But there is a bewildering list of possible causes and suspects, often contradictory, for how this arose including: the creation of massive imbalances between the oil-producing countries and China on the one hand and Western countries, principally the USA, on the other; growing income inequalities in the developed countries, again principally the USA; the unrestrained growth of the financial sector with too little regulation, or too much government intervention, depending on your point of view; the existence of hedge funds and other vastly more complex financial vehicles; the short-term greed of bankers and a reward system that encouraged reckless investment strategies. Economics has a long way to go before it can be called a science.

This wide-ranging book by Howard Davies, until recently the Director of the London School of Economics, has its origins in material prepared for a course of lectures at the LSE, but it is in no sense a textbook. In it he briefly reviews each of the many suggested causes in a clear simple way that is understandable to non-economists. Sometimes it is obvious what Davies' own views are, but sometimes he simply presents the arguments for and against, leaving the reader to make up their own mind. Each short chapter also has a list of references. These are mainly to newspaper articles and websites, rather than scholarly publications, so the general reader can easily locate them to explore the arguments in more detail. The book concludes with a very short summary of Davies' overall view.

The financial crisis is obviously of great importance to us all, particularly as governments are busily enacting legislation based on their own views of its cause, despite the lack of consensus about this. The book is a valuable contribution that enables the general reader to gain a clearer understanding of a very complex situation.
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1 of 1 people found the following review helpful
4.0 out of 5 stars The Financial Crisis - Howard Davies's account of a perfect storm of irresponsibility, 28 Nov 2010
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Red on Black - See all my reviews
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This review is from: The Financial Crisis - Who is to blame ? (Paperback)
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If you had to seek one person to clearly dissect the nature of the current financial crisis the name of Sir Howard Davies would come to the fore. He is a big brain, someone who can speak with authority, a real old clever clogs who has been there, done it and has a very smart CV to prove it. Currently the Director of the London School of Economics, he was the first Chairman of the controversial Financial Services Authority (FSA) between 1997-2003, also the Deputy Governor of the Bank of England from 1995 to 1997 and prior to this had served for three years as Director General of the Confederation of British Industry and was of course the previous Controller of the now defunct Audit Commission when it was power in the land. And it is that Auditors skill that he brings to this slim but crisply written volume which points to a range of culprits to answer his fundamental question who is to blame for this almighty mess which this week sees our Irish cousins on the verge of collapse.

Davies's chapter headings tell a story in their own right. Thus we have the "Rich get richer, the poor borrow", "The blind man and the elephant - US regulation" and a "Plague of locusts- hedge fund management". In 38 chapters some of which are very pithy others very complex he examines all the key protagonists in the crisis ranging from the banks, light touch regulation, derivatives, the credit ratings industry to the role paid by greed and especially pay and incentives.

Being the former head of the FSA his primary concern which is raised up front in the book is the key question "why did regulators maintain a weak hands off approach" as all around them indulged in reckless casino banking which saw the manual marked risk management completely shredded. Davies shows that the US regulation variant is particularly costly and Byzantine with a mass of agencies at national and state level. Indeed there is a separate body to examine the national housing bodies Fannie Mae and Freddie Mac which must rank high on the the list of the most miserable failures of all time. That said all were found seriously wanting and Davies points to what are "nineteenth century institutions charged with handling a twenty first century financial services industry". At this point the urge to shout that people in glass houses should not throw stones is almost irresistible since our own FSA of which Davies was the architect hardly covered itself in glory. To be fair Davies swallows hard and utters a mea culpa. He recognises that in Britain, tripartite arrangements dividing responsibility for financial regulation between the Treasury, the Bank of England and the Financial Services Authority led to a very clumsy handling of the September 2007 Northern Rock crisis. He also points to the heavy reliance of the FSA on auditors to do their groundwork and most importantly the fact that the FSA was viciously attacked by banks and by government (Blair and Brown speeches at the time are now high comedy) for its intrusiveness and the unprecedented flood of rules and regulations it spewed out.

Davies as a nice populist style. Any one who starts a book on the end of laissez-faire capitalism by quoting Billy Bragg must have something going for them and his chapters on psychological forces underpinning the crisis which examines risk-taking, oestrogen/testosterone levels and the screen culture that has turned banking into a big computer game are amusing although he concludes "we do not seem to have enough evidence yet to convict Lara Croft". Ultimately whether he lands a killer punch is another matter entirely since the range of actors involved in this crisis are diverse and Obama's phrase that what we have experienced "is a perfect storm of irresponsibility" is probably the biggest indictment of all. Nevertheless this is a enjoyable volume written in clear terms which is not afraid to apportion blame and point an accusatory finger, as such it makes for an excellent post mortem for a crisis that shows no sign of running out of steam yet.
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9 of 11 people found the following review helpful
5.0 out of 5 stars An excellent primer on the causes of the crisis, 25 Nov 2010
By 
Alan Pavelin (Chislehurst, UK) - See all my reviews
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This review is from: The Financial Crisis - Who is to blame ? (Paperback)
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There is an old joke that goes something like: "Put two economists in a room, and they'll come out with three opinions". Howard Davies, Director of the London School of Economics and well-known in the media, goes somewhat better: in separate chapters he considers no fewer than 38 opinions as to who is to blame for the 2007 world financial crisis, and in chapter 39 gives his own views about who is right. The book, which appears to have been completed just before the 2010 General Election, is not light reading, but presupposes a serious interest in, and understanding of, the complex issues involved. Each chapter is basically a resume of the reasons put forward for the opinion being discussed, with a list of references for further reading. Chapters 35-38, under the general heading "Wild Cards", discuss some relatively unconventional views, such as that proposed by the scientist Susan Greenfield that it is all the fault of video games, with which the younger members of the banking fraternity were brought up. These 4 chapters are probably more accessible to the reader unfamiliar with the complexities of the U.S. subprime market, fair value accounting, derivatives, hedge funds, and the many other topics discussed in the previous chapters. But for the initiated, and for those willing to learn, this is an excellent and comprehensive summary of the possible causes of a crisis about which the Queen, quoted on page 161 in a chapter about fraud, asked "Why did no one see it coming?".
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8 of 10 people found the following review helpful
4.0 out of 5 stars an honest appraisal, 27 Oct 2010
This review is from: The Financial Crisis - Who is to blame ? (Paperback)
a pretty decent overview of the recent financial crisis. some odd ball pyschological angles thrown in at the end - at least in my version which added little to the main thrust of the principal points emerging from the post mortem.

Some primary observations:

a) Macroeconomic background - not the best part of the book although clearly very pertinent. Not too many big conclusions here. plenty of economic biased analyses out there though and Davies highlighted the main points I have seen outlined elsewhere.

b) Financial regulation - excellent section outlining important areas for domestic and international consideration. A nice fit into Davies other books on financial regulation and central banking (both with David Green). Critical time for choosing how to 'catch up' on domestic and financial regulation of FS (don't forget other sectors) - a long boom since liberalisation in the 1970's does not provide much real impetus for (appropriate risk based and systemically focused) regulatory change and in fairness I don't think this current debacle will either. Dare I say it - we'll need a few more to crack the nut on this one. Heaven forbid. Bigger than the one just gone perhaps? Would that do the trick?

c) Institutional strengthening - There have been many crises over preceeding decades and booms and busts are not new to financial markets since the first Dutch stock market. So while I liked this section and its emphasis on quality of risk management, corporate governance, incentive schemes - in truth, if institutions ensure they don't do business their senior management and boards do not understand,or recruit management and boards who do, and establish checks and balances to underline this this will be half the battle - back to basics. As for incentive schemes this is undoubtedly an issue and the solution (in the absence of an effective approach to risk based profit measurement for bonus pools - quantifying risk a problem generally) seems to point towards longer term tie in to company shares and brands and a restructuring of the compensation package. First mover risk is an issue in FS and the solution will have to come from a regulatory led approach (guidelines and so on). Been here before, got the t-shirt and so on. Don't expect too many big changes on this front. Markets and participants have very short memories!

d) Role of quasi regulators

Useful section with an important critique on fair value accounting and rating agencies mainly being the new information. The audit profession as my former career is an area on which I have specific views and will decline further comment here - except to say I don't necessarily agree with the conclusions in this chapter - the book I received from Amazon at least!

e) Role of media

- glad to see this getting a bit of exposure even if just the financial press. An area of critical importance going forward and not only for financial services and the attendant financial sytemic risk there. We have just had a global crisis in financial services the unreal sector - and the fs sector has received the lion's share of the heat. The scrutiny should extend into the real economy and important sectors therein impinging on public health and attitudes - substantially behind the curve in terms of appropriate standards, regulation and supervision but no less of a systemic risk in some respects.

f) Overall

An excellent introduction and summary. As a former financial professional who has seen a few crises (local, global and institutional) many of the issues raised by the recent debacle are actually not new to me. Heard them before. Appropriate change in the wind? Financial services landscape changed forever? Real economy likewise? A new era of globalisation upon us and this the first real shock or test? Perhaps we will see. Then again when the easy money rolls in (easier for some than others anyway) memories are surprisingly short don't you think?

g) Are there any 'real' rogues out there who brought this plague upon us? Who benefited from the boom and did not pay a penny for the bust instead the cost being heaped upon the poor taxpayer (many of whom were happy to take the cheap credit while it was going without complaint it would seem with no thought for how it was to be repaid from earnings ??? - many would say evidence of a decline in real incomes rather than any immoral behaviour).

I am not inclined to scalp hunt per se but that said there is the general principle, no matter how hard to implement, that those who profit from a boom pay for the bust. If only the causality could be formulated the implications would be easier to enforce. I would not stop at shareholders and bondholders but also include bonused management and employees to some extent. Another reason to ensure incentive schemes going forward are sufficiently long term and tied to stock. But that's another story.

h) Booms and busts - examined in some depth in Davies other book on central banking. Is it possible to prevent an asset price bubble and so on. Over the long run economic growth trundles on (at least it has for a few hundred years anyway in the advanced economies) with from time to time dislocations or shocks that last a few years. Is this a pattern we must learn to live with, can we prevent the big rollers and ride the rest with minimal discretionary policy intervention (fiscal or monetary) and rely instead on automatic stabilisers. Perhaps the most interesting issue to emerge from the crisis and covered by a plethora of authors out there I am still wading through. The death of economics? I would say a shot in the arm - old issues reenergised for the modern global economy.

i) One final remark - the overwhelming influence of silo-mentality has tended to prevent holistic and optimal solutions to historical crises and this is brought out well in this book. All of the above areas are connected and must be viewed as a package of issues to address not as isolated challenges.

overall - 4/5.

G
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7 of 9 people found the following review helpful
3.0 out of 5 stars Thorough examination of the causes of the crisis, 27 Mar 2011
By 
Andrew Sillis (Worcester Park, Surrey, United Kingdom) - See all my reviews
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This review is from: The Financial Crisis - Who is to blame ? (Paperback)
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You might find this a tough read. I had a semester of university economics, and I'm a bit of a news addict - I was only just hanging on. If you've no serious economics background you will find this impossibly tough in places.
Having said that, I found the analysis thorough, written in short, punchy chapters, and structured so as to walk you through all the various components of the crisis - regulation, accountancy and banking practices, market operation, bankers pay, even Lara Croft's alleged influence.
Of course the crisis has multiple and complex causes which interplay. Davies' describes his book as an 'opinionated guide to the arguments', he dismisses some things and gives weight to others on the strength of his own experience as an economist and regulator. Others will place the emphases in different places. This makes me think this book falls between two stools. It is a difficult and technical read cutting out the casual reader (I for one would have benefitted from a glossary), but it is opinionated, cutting out any seriously analytical reader.
I approached the book hoping to learn something of financial ethics, and I certainly gained insights in that regard. I also was able to get behind some of the political rhetoric which circulates about the crisis. Did I understand more about the reasons for the crisis? Certainly. Am I clear about who to blame? Not really.
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7 of 9 people found the following review helpful
1.0 out of 5 stars A typical insider's view, 24 Mar 2011
By 
Chuck E (UK) - See all my reviews
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This review is from: The Financial Crisis - Who is to blame ? (Paperback)
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"It's harder to think of anyone better qualified than Howard Davies to evaluate the competing arguments about what caused the worst financial crisis and recession since the 1930s." So gushes Robert Peston on the back cover. Well, how about someone who was a critic of the system before it went bust!

Howard Davies presents a lazy trawl through the '38' possible culprits without laying a finger on one - or, at least, exonerating those he is most intimately acquainted with. A clue to the tenor of the argument can be found in his admission that "... as a former regulator (until 2003) I may attest that the political environment within which regulators worked was unfavourable to measures which tightened financial conditions, and in any event the tools regulators had at their disposal were far weaker than the interest rate weapon." The unintentional comedy in that declaration - hey, we couldn't regulate because nobody wanted us to - comes after a section concluding that the whole idea of 'light-touch regulation' was a myth, and that the UK and more particularly the US were, in fact, subject to a veritable flood of regulations (tell that to Brooksley Born, who tried in vain to convince legislators of the need to regulate Credit Default Swaps as Rubin and Summers merrily concocted the Financial Services Modernization Act). Indeed, this chapter neatly encapsulates the Davies approach: the title, 'Lighting the Touchpaper - Light-Touch Regulation' suggests that insufficient regulation was a factor - before airily dismissing the notion that it even existed.

The same tack is used on disposing of Hyman Minsky: having completely misrepresented (or misunderstood?) Minsky's hypothesis he then quotes the Ludwig Von Mises Institute as proof that it was the existence of a central bank rather than Ponzi finance schemes which was the culprit (a bit like asking the Krays for their views on policing). Similarly, the chapter titled 'The Death of Economics' develops into a resounding defence of Chicago School fundamentalism, quoting Gary Becker, 'I don't think any of the major ideas were wrong', before promoting the argument that the problem was down to the policy-makers not the economists, more particularly Clinton and Obama's policy-makers (Reagan and Bush i and II don't get a mention). Ultimately the risible Efficient Market Hypothesis gets a clean bill of health on the grounds that the 'recession' was pretty typical - up until the collapse of Lehmans, which no model could have predicted (apparently, the fact that no model could deal with such sudden falls in values doesn't undermine the EMH at all - they work until they don't work, and that's all we should expect).

Davies might argue that he is merely recounting other people's opinions, but it's pretty clear which ones carry the most weight (i.e. those at the end of the chapter endorsed by such scrupulously objective commentators as Niall Ferguson!). The most recurrent phrases are: 'it's too early to say', or 'no consensus has yet been formed', as Davies navigates one anodyne platitude after another, but the emphasis always seems to fall on the side of the market fundamentalists who argue that none of this could have been foreseen, and that, even if it could, ANY attempt to forestall the crisis would, by definition, have made matters worse because government is ALWAYS part of the problem, not the solution. There is never any intimation that those who proselytise this view might have some self-serving motive.

Even as we sit amid the rubble of one of the greatest MARKET failures in history (while regulators looked the other way, or sat on their hands claiming nobody wanted them), and our government pursues policies which can only dig the hole deeper, the Right continue with their 'markets as the best of all possible world's' thesis. Of course, the view that the market is always a better bet than government action isn't an economic position, it's an ideological one aimed at securing the interests of the super-rich, which it has done supremely well, and books like this will continue to be churned out by the truckload until the spell is broken.

A classic case of 'cognitive regulatory capture'(p.182). For a more objective view, which actually puts the current crisis in its historical and ideological context try John Cassidy's 'How Markets Fail', or George Cooper's update on Minsky and the 'Efficient Market Fallacy'.
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5.0 out of 5 stars Good book from a good seller, 6 July 2014
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This review is from: The Financial Crisis - Who is to blame ? (Paperback)
Good book from a good seller
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4.0 out of 5 stars Unpicking a tangled web of blame, 15 Mar 2011
This review is from: The Financial Crisis - Who is to blame ? (Paperback)
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This book will probably mainly be read by students. It has grown out of teaching materials Howard Davies developed at LSE. It takes apart the crisis in a structured way - with 38 different takes on the universe as though it might once have been powerpoint slides, and the 39th step is Davies' synthesis and his own viewpoint. Large chunks of the book are accessible to a wider audience, with some memorable visual images explaining concepts - the taxi at the station (liquidity), the blind man and the elephant (US regulation). But there are footnotes and quotes enough to feed several dissertations.

My brain was not large enough for all 38 arguments for who is to blame - but I got a flavour of the mess that is US regulation, and when that was too much switched to the sections reviewing those who blame Lara Croft video games, and testosterone on the dealing floor (and that applies to women too). There were some good statistics on how many MBA students cheat at business school and on business schools as an ethics-free zone.

As an ex-regulator (who left in 2003 before the crisis), Davies does not think regulators can take too much of the blame - "the tools regulators had at their disposal were far weaker than the interest rate weapon.... the political environment within which regulators worked was unfavourable to measures which tightened financial conditions."

But if anyone is expecting here a book which supports the establishment position, some elements seem quite Marxist. "Immediately before the crisis some 40% of all profits in the United States came from financial firms, giving them a huge influence both direct and indirect on policy makers."

Davies turns over a few awkward stones of western capitalism, and one is left with an uneasy feeling of money searching an easy buck that simply was not there to be had. Underlying the out of control profiteering of several institutions, may be large numbers in the US population trying to maintain living standards in the face of declining competitiveness. They borrowed money from China's surplus to boost spending power, and China's boom investors sought the apparent security of Western bond markets over their own boom industries, protecting a competitive exchange rate by investing abroad. One wonders how long western society can live on the never-never.
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5.0 out of 5 stars The Financial Crisis: A Concise and Incisive Examination of Possible Cause and Effect, 16 Feb 2011
By 
G. J. Oxley "Gaz" (Tyne & Wear, England) - See all my reviews
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This review is from: The Financial Crisis - Who is to blame ? (Paperback)
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The financial crisis: who was/is to blame?

There are so many theories flying around, that no single set of economists can agree on what triggered the collapse of global financial systems during the period 2007-09.

Several years ago I studied macroeconomics as an element of a higher qualification and came to the conclusion that it's too complex a subject with input from too many variables to predict future events - which is why not many appreciated the extent of the forthcoming crisis. Forecasting therefore remains educated guesswork at best and utterly ill-informed opinion at worst.

In this book, Howard Davies (Director of the LSE and Political Science*) has isolated thirty four of the factors that may, to have some extent or another, have contributed to the near collapse of world economies and the banking system.

Davies knows his stuff and has the ability to convey some very complex ideas with the kind of perfect clarity that only the truly intelligent and well informed (allied to superb research) can achieve

He concludes with his own level-headed opinion on the most important contributory factors, although he acknowledges that no-one can supply a truly definitive answer.

This is a fascinating, lucid and succinct set of well presented arguments, which also acts as a very good all-round macroeconomics primer. Brilliant stuff.

* a postition he has now resigned from over the Gaddafi business
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