*Engineering the Financial Crisis*

This is an excellent conceptual book on the financial crisis, full of deep research and intellectual honesty.  The authors, Jeffrey Friedman and Wladimir Kraus, are not in the usual loops of the economist elite, so I hope it is not ignored.  They place central importance on the Basel capital regulations and mark-to-market accounting, complemented by a credit channel, in their narrative.  Arnold Kling has much more on the book.  You can buy the book here; anyone interested in the financial crisis should read it.  The authors have some of the best arguments against the “moral hazard” interpretations of the crisis, preferring instead knowledge and calculation arguments.  My main worry is about how much the Basel regulations mattered, given that many banks held more mortgage-backed securities than Basel regulations required.

Here is a blog post on their most controversial claim in the book.


Comments for this post are closed