13 Bankers: The Wall Street Takeover and the Next Financial Meltdown

Louis Uchitelle

[Johnson and Kwak] tell this story in matter-of-fact prose. Even their discussion of derivatives is accessible to ordinary readers (most of the time)…a well-documented appeal to embrace once again Thomas Jefferson's skepticism of concentrated banking power.
—The New York Times

Kirkus Reviews

A stinging indictment of the reckless "new American oligarchy" that led the nation to an economic precipice-and which, because of the government bailout, the authors say, threaten to put U.S. taxpayers on the hook again. Unlike Andrew Ross Sorkin in his book Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System-and Themselves (2009), economics expert Johnson (Entrepreneurship/MIT Sloan School of Management) and business consultant Kwak prefer long-view analysis to microcosmic narrative. The authors trace suspicion of concentrated banking systems to the beginning of the republic. Jefferson suggested that supporting a federally chartered bank was tantamount to treason. Subsequent tectonic shocks-especially the Panic of 1907 and the Great Depression-led to the financial apparatus of the mid-century-the Federal Reserve, designed to backstop Wall Street in a crisis, and the New Deal, which, by separating commercial and investment banking, protected the ordinary investor from the perils of the system. During the past three decades, however, Republican and Democratic administrations alike have accommodated the CEOs of America's largest financial institutions as they plunged into new, larger markets. Techniques pioneered or expanded-structured finance, credit default swaps and subprime lending-built a real-estate and financial house of cards. Presidents placed former Wall Street players in senior Treasury and Fed posts because only they, it was felt, could understand this brave new world of modern finance. In this environment of "the soft power of access and ideology," regulation fell by the wayside, ballooning the industry and compensation. Theauthors argue convincingly that the philosophy behind the bailout-"too big to fail"-only consolidated more power in fewer firms, solidifying the remaining giants' influence over legislation and necessitating their breakup into smaller units. A detailed, dismaying and damning summation of recent Wall Street-Washington collusion-and the recurrent risk of financial folly.

Publishers Weekly

Though this blistering book identifies many causes of the recent financial crisis, from housing policy to minimum capital requirements for banks, the authors lay ultimate blame on a dominant deregulatory ideology and Wall Street's corresponding political influence. Johnson, professor at the MIT Sloan School of Management, and Kwak, a former consultant for McKinsey, follow American finance's rocky road from the debate between Jefferson and Hamilton over the first Bank of the United States through frequent friction between “Big Finance” and democracy to the Obama administration's responses to the crises. The authors take a highly critical stance toward recent palliative measures, arguing that nationalization of the banks would have been preferable to the bailouts, which have allowed the banks to further consolidate power and resources. Given the swelling size of the six megabanks, the authors make a persuasive case that the financial system cannot be secure until those banks that are “too big to fail” are somehow broken up. This intelligent, nuanced book might be too technical for general-interest readers, but it synthesizes a significant amount of research while advancing a coherent and compelling point of view. (Apr.)

From the Publisher

"Erik Synnestvedt reads with a strong and clear voice and an appropriate edge of indignation at the hubris of our nation's most powerful bankers." —-Publishers Weekly Audio Review