Financial institutions and markets : the financial crisis--an early retrospective /

Editors Bliss (Wake Forest Univ.) and Kaufman (Loyola Univ., Chicago) have produced a valuable addition to the literature on financial crises. Articles in the first part present a cohesive framework for understanding the root causes of financial crises, while the second part covers a range of broader topics related to financial regulation. Gillian Garcia examines material loss review data of US regulatory agencies to determine if regulators ignored red flags, concluding that regulatory agencies either did not recognize or failed to act on clear evidence of institutional overexposure to real estate markets. Richard Rosen focuses on the flaws in the system associated with the shadow banking system, arguing that overconfidence, inattention, and investors' desire for high yields were incentives to create high-yield securities with hidden risks. Two contributors analyze the British crisis and regulators' responses, and another reviews the situation in Spain. Other contributions include an assessment of the shortcomings of Fannie Mae and Freddie Mac, and the failure of Basil II to reduce the probability of banking crises. See related, Harold James's The Creation and Destruction of Value (CH, Apr'10, 47-4522) and Gary Gorton's Slapped by the Invisible Hand: The Panic of 2007 (CH, Oct'10, 48-0987). Summing Up: Highly recommended. Upper-division undergraduate students through faculty and researchers. D. C. Messerschmidt Lynchburg College