David WesselRecensioni

"Should be a first port of call for American voters sadly misinformed about their federal budget." -- Financial Times

I couldn't agree more.

This is a very readable book discussing the battle by the FED, and Bernake, to prevent the U.S. economy from collapsing into a full depression at the end of 2008. Many insights into the behind-the-scenes decisions being made, the extradordinary steps made to prop up the economy, and the complexity of it all.

Federal Reserve (Subject)

This is probably the first complete look at the Fed and Treasury's handling of the financial crisis. I've enjoyed getting greater detail on those events which I followed with much interest (and my students are writing a wiki about). I enjoy Wessel's columns and tweets.

Economists like Scott Sumner have been critical of the Fed's lack of aggressiveness in the crisis. While Bernanke thought "outside the box" it hasn't been enough for Dr. Sumner, who I respect a great deal. Wessel's book showed that many of the Fed presidents and FOMC members feared anything unorthodox. They would never relent to an inflation target, would never think of CREATING higher inflation as a way to combat the liquidity trap. I found that really sad, but I am glad to know what the political realities of Fed life are.

My criticism of Wessel's book is that he glosses over Lehman Brothers' collapse, focusing only on how its collapse affected other things. I suppose he left it to other books and the documentaries PBS Frontline did to tell the Lehman story, but glossing over that event and focusing on all the others seems a little bit of an odd choice.

Bernanke lashed out at Fed critics over the weekend. Rightly so, politicians are critical of him and others of doing too much when previously they were concerned that too little was done (ignoring that so much meddling by politicians helped fuel the housing boom in the first place). "You get no kudos for what might have been," Hank Paulson is quoted. Bernanke comes across as a good guy and national hero to Wessel, someone who did whatever it took when given few legal options.

I give the book 3.5 stars out of 5. It's good, but I look forward to more in-depth books on the crisis in the years (decades) to come.

73. In Fed We Trust by David Wessel

Borrowed from a friend, this one was quite an unlikely read for me. My finance background generally makes me too vary of books written about an event, with the perfect gift of hindsight. Too many articles occupy my browser and mail space, inspecting, dissecting and criticising every decision made by the Ministry of Finance, the Central Bank, the Securities Regulator, other Financial or Regulatory bodies including the Stock Exchanges themselves. Some of such criticisms and doomsday scenario do occasionally come true, but on the virtue of a broken clock being right twice in a day, than anything else. It would perhaps be prudent to put a disclaimer here declaring myself to be part of this ecosystem.

Anyway, it was with some trepidation that I read this book, half expecting it to be a blind bashing of every decision the Fed did make in the period 2007-10, a bad period for us finance professionals, my entry into the corporate world itself being ill-timed following this great meltdown. Many of such fears were greatly misplaced though, if anything, David Wessel has celebrated Bernanke in his work; you see, criticising a financial decision maker is too easy and infinitely more tempting that giving credit for a job well done.

The book carefully takes us through the years, giving us a glimpse of the Greenspan era, the appointment of Bernanke himself, and then the roller-coaster ride of the sub-prime crises, the events leading upto Lehmann, the events post Lehmann, the curious cases of Fannie Mae and Freddie Mac, and the reorganisation of the entire Investment Banking sectors, as we knew it. The book also took me through the world of multiple regulators in US and how financial institutions go cherry-picking for the most lenient one, a problem acutely faced in India, and a problem I fear will only worsen till fixed.

The book recognises and evaluates Bernanke, the Academician, using theories learnt from his lifelong study of the Great Depression, experimenting with all the tools available with the Fed, creatively creating a few new ones, when the old ones didn't seem to be up to the task.

Personally, I have and have had mixed feelings about the way the Panic was handled. While fully appreciating that the steps taken by Bernanke and his team were critical and absolutely necessary, I remain unconvinced if the Moral Hazard issue couldn't have been handled better. While I do believe that saving those banks from bankruptcy was critical, whether protecting shareholders' value and golden parachutes for the executives should have been part of the deal, well, I remain unconvinced.

The book touched upon many things I knew, many more that I thought I knew and exposed me to even more things I didn't.

Concise, user friendly, and downright scary. Especially helpful to highlight the ways in which both parties continue to kick the can down the road, while misleading the public about easy fixes.

A short, workmanlike review of the U.S. federal budget by a Wall Street Journal editor --- where the money goes, where it comes from, and how much it leave us owing. The book itself is politically neutral, a necessary (but infrequently found) attribute in meaningful budget discussion. Mr Wessel makes very clear the huge scope of the problem, and the fact that there are no easy solutions. He also makes it very clear that the most serious element of all is the current unwillingness of politicians to do anything about it. That ultimately reflects the fact that the American people, en masse, want more from government than they are willing to provide in tax revenues. Tough nut.½

mostly a chronology of the Fed's actions in Great Panic with lots of Wessel's own opinions thrown in (sometimes rather snidely), a good brief overview of the bank crisis, but not very deep and certainly limited in its breadth

An engaging account of the Fed's heroic (and at times /ad hoc/) struggle with an out-of-context complex of disasters and incredibly complicated vicious circles when the world financial system partially imploded. It could have been much worse: When the black swans came home to roost and impossible events cascaded, the Fed had to step far beyond its accustomed institutional role such that it had to act as a virtual fourth branch of government, much to the astonishment of many. This history is to the Federal Reserve and high finance what Apollo 13 was to NASA or the Cuban Missile Crisis was to the Cold War --a glimpse into the abyss.

The work is strong on the behind-the-scenes machinations of those who would ignore the hopes, dreams, and desires of ordinary Americans while making disastrous and irresponsible decisions. Although Wessell does his level best to humanize Bernanke, Geithner and other principals, they come off as unprincipled elitists they truly are. Those who made the unfortunate choices to further the recession starting from Bush to the Obama regime, as Wessel demonstrates, only sought to further their end of not being blamed for a second Depression. Along the way the economic picture of the U.S. worsened as BushObama perpetuated their own ends. It is an important if ultimately sickening story of the White House and Wall Street working hand in glove against Main Street.

Recommended by Syncione Bresgal.

David Wessel is the economics editor of The Wall Street Journal and his journalism background shows in this readable story of the behind-the-scenes activity in Washington as our current economic crisis began and grew. In some cases, there might be a little too much detail (for me) about who said what and when, but overall I found it gave me some good insight into what was going on and why people acted the way they did. To the extent Wessel concludes anything, he notes that Bernanke et al. will be judged by how fast we emerge from the problem, rather than whether they saved us from falling into a far worse situation than the one we're in.

It is only fitting that I am writing this book review on a Sunday. In Fed We Trust: Ben Bernanke’s War on the Great Panic starts off by telling about the importance of a few Sundays in 2008. In March, there was the Sunday when the Federal Reserve announced an unprecedented action to lend $30 billion to JPMorgan Chase to buy Bear Stearns. There was the Sunday in August when the Federal Reserve and the Treasury Department decided to seize Fannie Mae and Freddie Mac. Of course, there was the Sunday in September when they allowed Lehman Brothers to fail. There was the Sunday when Bank of America agreed to take over Merrill Lynch.

David Wessel tells a story about Ben Bernanke’s rule of the Federal Reserve deciding to do “whatever it takes” to protect the U.S. economy from the incredible economic threat of those Sundays. The story takes us through what it missed, what it did, what it didn’t do, what it got right and what it got wrong during the “Great Panic.”

During Alan Greenspan’s term as chairman of the Federal Reserve we mostly watched as he and the Board decided whether to raise interest rates or not. Most of the country thought that was the extent of what the Federal Reserve did. During Bernanke’s term we saw the incredible power of the Federal Reserve to create vast sums of money out of thin air.

One of the key takeaways from the book is that is very difficult “to get the politics, the policy and market reaction all right at the any one point in time.” That was a quote from former Secretary of the Treasury Henry Paulson shortly after leaving office.

The book is sometimes short on its depiction of events. The one that stuck out the most was the short description of the Merrill Lynch discussion by Bank of America’s Ken Lewis and Joe Price. The New York Attorney General tells a more interesting tale in his indictment of the Bank of America executives.

But of the book provides terrific insight into the events of the Great Panic. (That’s the term the Wessel uses.) During the full-court press of forcing the largest banks to take TARP money, it’s Merrill Lunch’s Thain that asks how taking the TARP money would affect government controls on executive compensation. As we later find out, Thain became one of the poster boys for the banks’ failures with executive compensation.

In the end, as we all know, mistakes were made. The Federal Reserve did not always get the politics, policy and market reaction right.

But what if Bernanke had not been a student of the Great Depression? What if he had not taken bold steps? I think the economy and the country would be much worse off.

I'm don't know about anyone else, but when my wages go up so do my taxes - no matter what the author says in this book.