Friday, May 6, 2016
I have my favorite authors............
.....................and Michael Lewis is one of them. I tend to read whatever he writes. This time it is a book review. The hero of his tale is Mervyn King, both the past governor of the Bank of England and Lewis's tutor at the London School of Economics. The book King wrote is The End of Alchemy: Money, Banking, and the Future of the Global Economy.
Two excerpts from Lewis's review:
King’s starting point is that the 2008 crisis wasn’t an anomaly but the natural consequence of bad incentives that are still baked into money and banking -- and so quite likely to create another, possibly even greater, crisis.
The financial system, King reveals, is still wired so that a handful of well-connected people capture the benefits from risk-taking while the entire society bears the cost.
An excerpt from The End of Alchemy:
“Regulation has become extraordinarily complex, and in ways that do not go to the heart of the problem. … The objective of detail in regulation is to bring clarity, not to leave regulators and regulated alike uncertain about the current state of the law. Much of the complexity reflects pressure from financial firms. By encouraging a culture in which compliance with detailed regulation is a defense against a charge of wrongdoing, bankers and regulators have colluded in a self-defeating spiral of complexity.”