Books That Matter: 13 Bankers, by Simon Johnson & James Kwak
On Friday, March 27, 2009, the CEOs of thirteen of the country’s largest financial institutions gathered at The White House to meet with President Barack Obama.
“My administration is the only thing standing between you and the pitchforks.” President Barack Obama, said on that Friday in March, which was apparently a lovely day in Washington D.C. Or, so writes Simon Johnson and James Kwak in their new book, “13 Bankers – The Wall Street Bankers and the Next Financial Meltdown”.
“The basic principal behind any ‘oligarchy,’ is that economic power yields political power,” begins Chapter 4 of this book, and if there could be one sentence chosen to identify this book’s central theme, this would have to be the one, in my mind anyway.
“In the United States, we like to think oligarchies are a problem that other countries have. The term came into prominence with the consolidation of wealth and power by a handful of Russian businessmen in the mid-1990s.,” explains the authors. “(The term) applies equally well to other emerging market countries where well-connected business leaders trade cash and political support for favors from the government.”
And with that prescient thought, you have begun your journey into “13 Bankers,” and let me assure you, it’s a journey you will both never forget, and likely take more than once. In fact, I’m betting that anyone that reads this book once, goes through it at least twice, and then keeps it handy in order to read passages to others as the topic arises. And I hope you and everyone else does the same thing, because I feel certain that history will one day show this to have been one of the most important books ever written for our country.
“13 Bankers” was written by Simon Johnson and James Kwak, the pair that, in September of 2008, founded “The Baseline Scenario,” a really, really, really smart (but easy to read) blog that focuses on issues related to the global financial crisis.
If you aren’t already familiar with Johnson, you’re in for a real treat. Do you like listening to Elizabeth Warren, the uber-smart, blunt talking TARP Chief, who doesn’t seem to have a political bone in her body… says what she’s thinking, and has appeared on Bill Maher’s show more than once? Well, Johnson and Liz are two of my favorite people on the planet, simple as that. If I could have dinner with any two people, these two would top my list. I don’t know Johnson’s partner as well, but I’m quite sure he’d be high on that list as well.
Simon Johnson, a professor at MIT’s Sloan School of Management since 2004, was the chief economist for the International Monetary Fund, the very first chief economist at the IMF to have a blog, by the way. While at the IMF, he led the global economic outlook team, helping to formulate innovative responses to worldwide financial turmoil. And I simply don’t know if you can have a more relevant and qualified background to weigh in on the situation in our country today.
Kwak, after graduating from Harvard, went on to earn his doctorate in… ready for this… French Intellectual History at U.C. Berkeley, before accepting a position at McKinsey. Guessing he’s smart? You’d be right.
So, who were the thirteen bankers, for which the book was titled?
Kenneth I. Chenault, American Express
Ken Lewis, Bank of America
Robert Kelly, Bank of New York Mellon
Vikram Pandit, Citigroup
John A. Koskinen, Feddie Mac
Loyd Blankfein, Goldman Sachs
Jamie Dimon, JPMorgan Chase
John Mack, Morgan Stanley
Rick Waddell, Northern Trust
James Rohr, PNC
Ronald Logue, State Street
Richard Davis, US Bank
John Stumpf, Wells Fargo
Johnson and Kwak point out in no uncertain terms that were it not for “massive government intervention in the form of direct investment of taxpayer money, government guarantees for multiple markets, practically unlimited emergency lending by the Federal Reserve, and historically low interest rates,” these banks would have followed the same path of Washington Mutual, Wachovia and Lehman Bros.
The authors don’t mince words and have a marvelous and very straightforward way of explaining things.
“(Wall Street’s bankers) used huge balance sheets to place bets in brand new financial markets, stirring together complex derivatives with exotic mortgages in a toxic brew that ultimately poisoned the global economy. In the process they grew so large, that their potential failure threatened the stability of the entire system giving them a unique degree of leverage over our government.”
Yes, even though these are the same banks that played a central role in causing the financial crisis and the recession, the administration decided that these would also be the banks on which the country’s economic prosperity depended.
And that paragraph alone should frighten you. But, it’s only the beginning of what “13 Bankers” makes equisitely, if painfully, clear.
“Last year President Obama, to his credit, tried to take advantage of the financial crisis and public’s anger over the enormous bonuses being paid out by the banks, to get the bankers to support his financial reforms, but the mega banks reported record profits (and matching bonus pools) and the industry rolled out its heavy guns taking particular aim at the moderate reforms designed to protect consumers from being blown up by expensive and risky mortgages, credit cards, and bank accounts.”
One of the things about “13 Bankers,” is that it takes the events of the last couple of years, events you’ll remember like they were yesterday, largely because some of them were, and fills in all possible blanks, washes over anything black and white with Technicolor, and leaves you with a much richer and fuller understanding of what has gone on, and continues to go on in this country today. To not read this book is a real loss, in my view.
“In September, when President Obama gave a major speech at Federal Hall in New York, asking Wall Street to support significant reforms, not a single CEO of a major bank bothered to show up.”
Yeah, not only that, but remember when, during the winter of this year, Obama summoned a group of bankers to The White House so as to be read the riot act as related to the foreclosure crisis, and three of them, Lloyd Blankfein, Vikram Pandit and John Mack… didn’t show up, saying it was too foggy? I sure do, because before that happened, I did not know that trains stopped running in the fog… and I grew up back east. Fog… well, I suppose that’s better than the excuse having been “rain,” or “cold weather”.
And “13 Bankers” isn’t just a book that provides you with historical facts, it’s literally packed with context.
“Why did this happen? Why did the near collapse of our financial system and the desperate rescue by two reluctant presidential administrations fail to give the government any real leverage over the major banks?
Over the last 30 years, the financial industry had become the wealthiest industries and the most powerful political forces in Washington. The thinking became what’s good for the banking industry is good for America. Even with cracks in that thinking showing, the banks still roll out their fire power that few of us can see: campaign money and lobbyists.
Wall Street’s influence is what created the environment in which the big banks became bigger and riskier until by 2008, the threat of their failure could hold the rest of the economy hostage. That influence also meant that when the government did rescue the banks, they did so on terms favorable to those banks.”
Because as Johnson and Kwak say in the book, and truth be told, it’s a line I’ll likely remember and use again and again, perhaps throughout my life, although I certainly hope not: “Politicians may come and go, but Goldman Sachs remains.”
Perhaps most remarkable is that “13 Bankers” accomplishes all that it does in roughly 200 pages, start to finish. And it’s not just broad discussions of lofty concepts, it drills down and provides readers with details on what’s happened that were so piercing that I had to pause on several occasions and reflect on our country and the world. Like I said, this is a book you read and then quote from over dinner months later.
Johnson and Kwak even delve into that we, as American citizens that love our country, must do to break the financial oligarchy that is blocking essential reform and ensure our collective future. It’s not theoritcal in the least, it’s motivation and instructional. Time to take action, and this being an election year, I can’t even conceive of a better time for the country to read… “13 Bankers”.
“The Wall Street Banks are the new American oligarchy; a group that gains political power… because of their economic power, and then uses that political power for its own benefit.”
Order your copy of “13 Bankers” right away. And just so you know, I’m seeing more people buying multiple copies of this book… obviously to give to others… than any book I’ve ever seen ordered. One person ordered 20 copies, and many ordered more than five. Amazing reading… just amazing.
And yes, when you order your copy, or copies from the link below, you help Mandelman Matters at the same time, because as an Amazon Affiliate, we do receive a small percentage of the books sold as a result of people clicking on our link.
“Never in the field of financial endeavor has so much money been owed by so few to so many, and one might add, so far with little real reform.” (Mervyn King, Governor of the Bank of England, October 20, 2009. As quoted from “13 Bankers”.)
AND IT’S FAR FROM BEING JUST ME WHO FOUND THIS BOOK TO NOT ONLY BE FANTASTIC READING, AND TERRIBLY IMPORTANT… BUT ACTIONABLE. CHECK OUT WHO ELSE SAID WHAT…
“The best explanation yet for how the smart guys on Wall Street led us to the brink of collapse. In the process, Johnson and Kwak demystify our financial system, stripping it down to expose the ruthless power grab that lies at its center.”
— Elizabeth Warren, Leo Gottlieb Professor of Law, Harvard Law School; and Chair, TARP Congressional Oversight Panel
“Essential reading for anyone who wants to understand what comes next for the world economy. Dangerous and reckless elements of our financial sector have become too powerful and must be reined in. If this problem is not addressed there is serious trouble in all our futures.”
— Nouriel Roubini, Professor of Economics, Leonard N. Stern School of Business, New York University; and Chairman of Roubini Global Economics
“What Simon Johnson (and James Kwak) are telling us is that we are subjecting ourselves to rule by a self-perpetuating banking oligarchy. Which leaves two questions: Are we listening? And if we are, then what are we going to do about it?”
— Congressman Alan Grayson
“13 Bankers is a tour de force. For those many Americans who believe they have never received an adequate explanation about why the United States economy crashed in 2008, who is to blame, where their tax dollars went, and why the villains have thrived while everyone else has suffered, read this book or be prepared for history to repeat itself soon.”
— Michael Greenberger, Professor of Law, University of Maryland School of Law School; Former Director, Trading and Markets Division, Commodity Futures Trading Commission
“13 Bankers is an absolutely brilliant and spellbinding forensic analysis of Main Street’s economic murder at the hands of financial behemoths who gambled recklessly with the taxpayers’ chips while paying Washington to look the other way. From Jefferson and Jackson to South Korea and Russia, the book traverses time and space in documenting that banks that are ‘too big to fail’ are far too big to be preserved. The message is clear: bust the financial trusts and do it now!”
— Laurence J. Kotlikoff, Professor of Economics, Boston University, and author of Jimmy Stewart Is Dead.
“As Simon Johnson makes lucidly and compellingly clear, the problem with Wall Street leads directly to the core problem of our democracy. American politics now feeds on money, and Wall Street is where the money is. Unless we separate money from politics, we’ll never be safe from another financial meltdown. In fact, we’ll never really be safe. Read this fine book and get to work.”
— Robert B. Reich, Professor of Public Policy, University of California at Berkeley, Former U.S. Secretary of Labor
“Beautifully written and powerful. Ties the current financial crisis to a cycle of politics as old as the Republic, and to a pathology in our politics that is as profound as any that our Republic has faced. Required reading for the president, and for anyone else who cares for this Republic.”
— Lawrence Lessig, Director of the Edmond J. Safra Foundation for Ethics, Harvard University
“Simon Johnson makes it clear that our financial system is broken, and that Wall Street and Washington broke it. Sadly, he also makes it clear that they want to keep it that way. His gripping book explains how the economic crisis developed and what must be done to create a fair system, one that will benefit all Americans rather than just those who are the members of the club.”
— Herbert A. Allen III, President and Chief Executive Officer, Allen & Company