Readings: What to Read on the Financial Crisis (Foreign Affairs)

What to Read on the Financial Crisis

By Timothy Taylor

November 25, 2009

In July 2007, the U.S. economy looked fairly healthy. There had not been a recession in more than five years, and the unemployment rate was under five percent. Housing prices had been rising at an unsustainably rapid rate, but this was generally seen as a containable problem. Then, almost out of the blue, came what will probably turn out to be the longest and deepest U.S. recession since the Great Depression. As with the Depression, the causes and lessons of this crash will be studied for decades and spur new understandings of the interactions of government, private markets, and financial institutions. The works below constitute a first draft of the history of what happened and what it meant.

The Rise and Fall of the U.S. Mortgage and Credit Markets: A Comprehensive Analysis of the Market Meltdown. By James R. Barth. John Wiley, 2009.
Purchase at B&N.com | Purchase at Amazon.com

Everyone knows that the financial crisis stemmed from risky subprime-mortgage lending. But this book details exactly how the housing and financial markets veered wildly off track. James Barth begins by discussing how mortgage markets had traditionally worked and then explains the rise of subprime mortgages and how the financial pain reverberated through the financial sector. The culprits include greed, misguided regulation, overenthusiastic encouragement of homeownership, poor leverage and accounting practices, complicit ratings agencies, and runaway financial innovation.

"The Origins of the Financial Crisis." By Martin Neil Baily, Robert E. Litan, and Matthew S. Johnson. Initiative on Business and Public Policy at Brookings, Fixing Finance Series, Paper 3, November 2008.
Read

This report focuses on the origins of the financial crisis: how the inflation of housing prices fed into the growth of the subprime market. The paper does an especially nice job explaining how the bubble was financed -- namely, through the issue of complex financial securities, many of which received AAA ratings and were held by banks. When the bubble burst, these financial securities lost value, spreading the crisis throughout the financialsector and eventually the economy at large.

In Fed We Trust: Ben Bernanke's War on the Great Panic: How the Federal Reserve Became the Fourth Branch of Government. By David Wessel. Crown Business, 2009.
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As the financial crisis began in late 2007 and continued into 2008 and 2009, the major policy response did not come from President George W. Bush, President Barack Obama, or Congress, but from the unelected economists and bankers at the Federal Reserve. For starters, the Fed rapidly cut interest rates to near-zero. In the past, the Federal Reserve had made loans primarily to commercial banks with high-level collateral such as Treasury bills. But during this crisis, the Fed began lending to all sorts of entities -- investment banks, insurance companies, broker-dealers -- and accepting all kinds of collateral. Fed leaders have been involved at every critical policy juncture, including the failures of Bear Stearns and Lehman Brothers and the request to Congress for $700 billion in TARP (Troubled Asset Relief Program) funds to recapitalize banks. Ben Bernanke took over as Fed chairman in February 2006, heading to Washington from Princeton University, where he was a highly respected economist well-known for his work on the Great Depression. This readable book tells the story of an institution and its leader at a time when the Fed seemed like a fourth branch of government and Bernanke was determined to do whatever it took to abort a financial meltdown.

"The Long Climb: A Special Report on the World Economy." By Simon Cox. Economist, October 3, 2009.Read

In this special 28-page feature article in The Economist, Simon Cox lucidly portrays the aspects of the economic situation in late 2009: American consumers and banks paying off their debts; China's potential role in leading the world economy out of recession; the pluses and minuses of stimulus packages; the lasting lessons for the world of finance. His bottom line is that since economic recoveries after periods of financial turmoil tend to be slow, sluggish growth with high unemployment seems likely to persist for the next several years.

Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe. By Gillian Tett. Free Press, 2009.Purchase on B&N.com | Purchase on Amazon.com

Gillian Tett begins this entertaining book by asking, "Were the bankers mad? Were they evil? Or were they simply grotesquely greedy?" The answer, of course, is more complex than any of the above. Tett explains how, in the 1990s, financiers at J.P. Morgan invented new financial instruments with names such as "credit default swaps" and "synthetic collateralized debt obligations." In their early incarnations, these tools seemed a bit arcane but benign, even reasonable. But as they were adopted elsewhere, they gradually assumed forms and risks that they were not designed to bear. This book takes you inside the world of high finance and provides a readable and interesting tour of the securities that financed the housing bubble and spread the destruction when the bubble burst.

"Causes of the Financial Crisis." Critical Review 21, nos. 2-3 (2009).  
Read

This special issue of Critical Review includes a dozen articles by prominent economists with differing beliefs and emphases. Together, they yield a helpful and important guide to serious debates over what happened and why. Joseph E. Stiglitz argues that the roots of the crisis lay in decisions made by banks facing misguided incentives and lackluster regulation. John B. Taylor, conversely, argues that the crisis was "caused, prolonged, and worsened by a series of government actions and interventions." Articles by Jeffrey Friedman, Viral Acharya and Matthew Richardson, and Amar Bhidé detail how the crisis evolved from a set of regulations and practices that were well adapted to old situations but not new ones. Peter Wallison argues that credit-default swaps were not to blame for the financial crisis, while Lawrence White asserts that the peculiar authority granted by the government to credit-ratings agencies like Standard and Poor's, Moody's, and Fitch was very much part of the problem.

Source: Foreign Affairs

Academia: Free Online World Politics Courses From Top Universities

Free Online World Politics Courses From Top Universities

There are 27 online World Politics courses offered free by top universities, including MIT (Massachusetts Institute of Technology) and UMass (University of Massachusetts).

1. Collective Choice I - MIT

Graduate level course that investigates the political economy (the influences of economics and political events on the economy) in democratic countries. Topics include macroeconomics, political parties models, vote buying, lobbying, coalitions and government stability.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
8	9	8.5

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2. Introduction to Latin American Studies - MIT

Graduate level course that investigates the political economy (the influences of economics and political events on the economy) in democratic countries. Topics include macroeconomics, political parties models, vote buying, lobbying, coalitions and government stability.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
9	8	8.5

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3. New Global Agenda: Exploring 21st Century Challenges through Innovations in Information Technologies - MIT

Intro to 21st century international politics. Course emphasis is on the impact of information technology.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
9	8	8.5

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4. Political Economy of Globalization - MIT

Focus on the international economy. How do changes in it and the various governments that control it affect policy making and domestic policies?

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
6	7	7.5

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5. Labor and Politics - MIT

Effects (i.e. risks or opportunities) of various factors, such as privatization and globalization, on labor in third world countries.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
6	7	7.5

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6. Field Seminar in International Relations Theory - MIT

International relations undergraduate and graduate seminar. Various concepts and theories are presented.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
6	7	7.5

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7. Globalization, Migration and International Relations - MIT

Students in this course examine the extent of globalization by following the development of international interactions.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
8	7	7.5

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8. Ethnicity and Race in World Politics - MIT

Intro to racial and ethnic politics in a bid to comprehend world politics as they are today.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	8	7.5

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9. Government and Politics of China - MIT

Into to politics in modern-day China. Topics include communist revolution, Mao, social upheaval and 1990s China.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
8	7	7.5

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10. Reading Seminar in Social Science: International Political Economy- MIT

Look at the economic relations between nations and the politics behind them. Course explores globalization, communist transition and terrorist financing.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
8	7	7.5

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11. Political Philosophy: Global Justice - MIT

Study of the standards (basis and content) of justice that extend across an individual state's borders. Issues specifically studied include human rights and economic and political justice.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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12. Advances in International Relations Theory - MIT

Investigation of current theories on international relations. Looks at latest emerging theories, institutionalism, liberalism and realism.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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13. Field Seminar in International Political Economy - MIT

Covers basic principles, differing perspectives, implementing empirical analysis and theory and the latest tendencies in analysis and theory.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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14. International Political Economy of Advanced Industrial Societies - MIT

Overview of IPE (international political economy), which examines security and international financial and monetary relations, and trade. Course is for doctoral students.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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15. International Relations - UMass

Intro to international relations, focusing on idealism and realism.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	Yes
Podcast of Course?	No
Audio for Course?	Yes
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
8	9	8.5

1. Comparative Politics and China - MIT

Graduate level seminar with a focus on contemporary politics in China. Course uses methodological and theoretical approaches.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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2. Political Economy of Latin America - MIT

Students in this political science class examine the politics surrounding economic reform, especially in Latin America. This course is intended for graduate and doctoral students.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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3. The Politics of Global Financial Relations - MIT

Study of financial globalization and its associated influences on domestic politics and international relations.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
6	8	7

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4. Chinese Foreign Policy - MIT

Intro to foreign policy of China from 1949 onward.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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5. Politics and Policy in Contemporary Japan - MIT

Introduction to modern Japan, its politics and the process to formulate policy.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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6. Political Economy of Chinese Reform - MIT

Study of transitions in China. Focuses on various types of reform, including enterprise and social welfare.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	7	7

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7. Political Economy of Development - MIT

Course presents an analysis of why some countries get rich while others remain poor. Course emphasis is on the relationship between globalization and development.

Course Feature	Result for Home User
Degree Level	Graduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	6	6.5

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8. Political Economy of Western Europe - MIT

Students in this course explore the influence of European states in the time after the end of WWII. Topics include state traditions, Keynesianism and state enterprises.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	6	6.5

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9. Globalization - MIT

An investigation of globalization. Is it new? Irreversible? How it influences democracy, innovation or social safety nets.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
7	6	6.5

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10. Working in a Global Economy - MIT

Study of the global economy. Students study main debates and the impact of globalization on policy and practice.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
6	7	6.5

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11. International Relations of East Asia - MIT

A look at the countries making up East Asia and their international relations.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
6	7	6.5

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12. Democratization in Asia, Africa and Latin America - MIT

Undergraduate level study of the democratization of countries in developing areas.

Course Feature	Result for Home User
Degree Level	Undergraduate
Lectures, Notes or Reading Lists?	Yes
Labs and Assignments?	Yes
Tests or Quizzes with Solutions?	No
Video Lectures?	No
Podcast of Course?	No
Audio for Course?	No
Downloadable Materials?	Yes

DiplomaGuide.com Course Grade (1 worst - 10 best)

Quality of Content	Usability for Home User	Overall Grade
6	7	6.5

Thanks to George Sturaro.


Source: DiplomaGuide.