by Adam Tooze
34. Ferguson and Schularick, “‘Chimerica.’”
35. L. H. Summers, “The United States and the Global Adjustment Process” (speech, Stavros S. Niarchos Lecture Institute, Washington, DC, 2004).
36. R. Suskind, The Price of Loyalty: George W. Bush, the White House, and the Education of Paul O’Neill (New York: Simon & Schuster, 2004), 291–292.
37. B. Delong, “I Belong to No Organized Political Party,” Grasping Reality with Both Hands (blog), November 2006, http://www.bradford-delong.com/2006/11/index.html.
38. A. Berman, Herding Donkeys: The Fight to Rebuild the Democratic Party and Reshape American Politics (New York: Picador, 2010).
39. The quotation is from Matthew Yglesias in B. Delong, “I Belong to No Organized Political Party.”
40. “Brad Delong: The Democrats’ Line in the Sand,” Economist’s View, June 30, 2008, http://economistsview.typepad.com/economistsview/2008/06/brad-delong-the.html.
41. L R. Jacobs and D. King, Fed Power: How Finance Wins (Oxford: Oxford University Press, 2016).
42. Minutes of the Federal Open Market Committee (FOMC) meeting, June 29–30, 2004, https://www.federalreserve.gov/fomc/minutes/20040630.htm.
43. The so-called Mundell-Fleming model of open economy macroeconomics originated already in the 1960s, see J. M. Boughton, “On the Origins of the Fleming-Mundell Model” (IMF Staff Papers 50, 2003), 1–9.
44. B. Bernanke, “The Global Saving Glut and the US Current Account Deficit,” No. 77, Board of Governors of the Federal Reserve System (US), 2005.
45. B. Bernanke, “On Milton Friedman’s Ninetieth Birthday” (conference to honor Milton Friedman, November 8, 2002).
46. M. Friedman and A. J. Schwartz, A Monetary History of the United States, 1867–1960 (Princeton, NJ: Princeton University Press, 2008), 407–414.
47. Ben S. Bernanke, “Constrained Discretion and Monetary Policy,” remarks before the Money Marketeers of New York (New York: New York University, 2003).
48. B. Applebaum, “Bernanke, as Professor, Tries to Buff Fed’s Image,” New York Times, March 20, 2012, and B. Bernanke, “The Federal Reserve and the Financial Crisis Origins and Mission of the Federal Reserve,” Lecture 1, George Washington University School of Business, March 20, 2012.
49. T. Adams, “The US View on IMF Reform” (Conference on IMF reform, September 23, 2005), https://piie.com/commentary/speeches-papers/us-view-imf-reform.
50. P. Blustein, Off Balance: The Travails of Institutions That Govern the Global Financial System (Waterloo, Ontario: CIGI, 2013), 51–66.
51. “Paulson May Be Bringing Heft to China Currency Drive,” Taipei Times, June 1, 2006.
52. One powerful advocate for a G2 approach was the influential Fred Bergsten; see “A Partnership of Equals: How Washington Should Respond to China’s Economic Challenge,” Foreign Affairs 87 (July/August, 2008): 57–69.
53. “Fact Sheet Creation of the US-China Strategic Economic Dialogue,” US Department of the Treasury, September 20, 2006, https://www.treasury.gov/press-center/press-releases/Pages/hp107.aspx. H. M. Paulson Jr., “A Strategic Economic Engagement: Strengthening US-Chinese Ties,” Foreign Affairs 87 (September/October 2008), 59–77.
54. For the quotes that follow, see “The Panic About the Dollar,” Economist, November 29, 2007; G. Steingart, “A Pearl Harbor Without War,” Der Spiegel, November 13, 2007; “Supermodel ‘Rejects Dollar Pay,’” BBC News, November 6, 2007; M. Nizza, “Heads Turn over Model’s Disputed Dollar,” New York Times, November 6, 2007; “Gisele Bundchen Doesn’t Want to Be Paid in Dollars,” Fox News, November 5, 2007; C. Giles, “Adjustment or Affliction?,” Financial Times, December 10, 2007; and D. Usborne, “Rappers Join Models in Insisting on Euros as Greenbacks Fall Further Out of Fashion,” Independent, November 17, 2007.
55. P. Krugman, “Will There Be a Dollar Crisis?,” Economic Policy 22 (2007), 436–467.
56. D. W. Drezner, “Bad Debts: Assessing China’s Financial Influence in Great Power Politics,” International Security 34 (Fall 2009), 7–45.
57. J. B. DeLong, “The Wrong Financial Crisis,” Vox, October 10, 2008.
CHAPTER 2: SUBPRIME
1. Y. Barnes, “Around the World in Dollars and Cents,” Savills World Research, 2016, http://pdf.euro.savills.co.uk/global-research/around-the-world-in-dollars-and-cents-2016.pdf.
2. Congressional Budget Office, “Housing Wealth and Consumer Spending Report,” 110th Cong., January 2007.
3. UNCTAD, Trade and Development Report 2010, New York, 44.
4. O. Jordà, M. Schularick and A. M. Taylor, “Betting the House,” Federal Reserve Bank of San Francisco, June 2014.
5. O. Jordà, M. Schularick and A. M. Taylor, “The Great Mortgaging: Housing Finance, Crises and Business Cycles,” Economic Policy 31 (September 2014), 107–152.
6. W. L. Silber, Volcker: The Triumph of Persistence (New York: Bloomsbury Press, 2012), 125–215.
7. L. Silk, “The Interest Rate Issue,” New York Times, July 21, 1981.
8. On the politics of this moment, see S. Eich and A. Tooze, “The Great Inflation,” in Vorgeschichte der Gegenwart: Dimensionen des Strukturbruchs nach dem Boom, ed. A. Doering-Manteuffel, L. Raphael and T. Schlemmer (Göttingen: Vandenhoek & Ruprecht, 2015).
9. Remarks by Governor Ben S. Bernanke, “The Great Moderation,” at the meetings of the Eastern Economic Association, Washington, DC, February 20, 2004. For a review of the literature that Bernanke was drawing on see James H. Stock and Mark W. Watson, “Has the Business Cycle Changed and Why?,” NBER Macroeconomics Annual 17 (2002), 159–218.
10. R. K. Green and S. M. Wachter, “The American Mortgage in Historical and International Context,” Journal of Economic Perspectives 19 (2005), 93–114.
11. Simplifying a more complicated story analyzed in W. H. Starbuck and P. N. Pant, “Trying to Help S&Ls: How Organizations with Good Intentions Jointly Enacted Disaster,” in Organizational Decision Making, ed. Z. Shapira (Cambridge: Cambridge University Press, 1996), 35–60.
12. T. Curry and L. Shibut, “The Costs of the Savings and Loan Crisis: Truth and Consequences,” FDIC Banking Review, https://www.fdic.gov/bank/analytical/banking/2000dec/brv13n2_2.pdf.
13. Schwartz, Subprime Nation, 96–101.
14. R. K. Green and A. B. Schnare, “The Rise and Fall of Fannie Mae and Freddie Mac: Lessons Learned and Options for Reform,” No. 8521, USC Lusk Center for Real Estate, 2009.
15. R. Rothstein, The Color of Law: A Forgotten History of How Our Government Segregated America (New York: W. W. Norton, 2017).
16. J. B. Judis and R. Teixeira, The Emerging Democratic Majority (New York: Macmillan, 2002).
17. The most influential statement of the case is C. W. Calomiris and S. H. Haber, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit (Princeton, NJ: Princeton University Press, 2014). For a critical review, see M. Konzcal, “Guest Post: A Review of Fragile by Design,” Roosevelt Institute, November 3, 2017.
18. D. Jaffee and J. M. Quigley, “The Future of the Government Sponsored Enterprises: The Role for Government in the US Mortgage Market” (NBER Working Paper 17685, Cambridge, MA, 2011).
19. N. Fligstein and A. Goldstein, “A Long Strange Trip: The State and Mortgage Securitization, 1968–2010,” in The Oxford Handbook of the Sociology of Finance, ed. A. Preda and K. Knorr-Cetina (Oxford: Oxford University Press, 2012), 339–356.
20. The story is well told in M. Lewis, Liar’s Poker (New York: W. W. Norton, 2010); and B. McLean and J. Nocera, All the Devils Are Here: The Hidden History of the Financial Crisis (New York: Penguin, 2010).
21. K. Dennis, “The Ratings Game,” University of Miami Law Review 63 (2008–2009); and L. J. White, “The Credit-Rating Agencies and the Subprime Debacle,” Critical Review 21 (2009), 2–3, 389–399.
22. N. Fligstein and A. Goldstein, “The Anatomy of the Mo
rtgage Securitization Crisis,” in Markets on Trial: The Economic Sociology of the US Financial Crisis, Part A, ed. M. Lounsbury and P. M. Hirsch (Bingley: Emerald Group, 2010), 29–70.
23. Jaffee and Quigley, “The Future of the Government Sponsored Enterprises.”
24. A. B. Ashcraft and T. Schuermann, “Understanding the Securitization of Subprime Mortgage Credit,” Federal Reserve Bank of New York Staff Reports 318 (March 2008).
25. A. Goldstein and N. Fligstein, “The Transformation of Mortgage Finance and the Industrial Roots of the Mortgage Meltdown,” Mimeo, 2014.
26. P. Gowan, The Global Gamble: Washington’s Faustian Bid for World Dominance (London: Verso, 1999).
27. P. Augar, The Greed Merchants: How the Investment Banks Played the Free Market Game (London: Penguin, 2005).
28. G. Tett, Fool’s Gold: The Inside Story of J.P. Morgan and How Wall St. Greed Corrupted Its Bold Dream and Created Financial Catastrophe (New York: Free Press, 2009).
29. G. Krippner, Capitalizing on Crisis: The Political Origins of the Rise of Finance (Cambridge, MA: Harvard University Press, 2011).
30. Z. Pozsar, “Institutional Cash Pools and the Triffin Dilemma of the US Banking System” (IMF Working Paper 11/109, August 2011).
31. P. Gowan, “Crisis in the Heartland,” New Left Review 55 (January/February 2009).
32. Augar, Greed Merchants, 34.
33. Tobias T. Adrian and H. S. Shin, “Liquidity and Lleverage,” Journal of Financial Intermediation 19 (2010), 418–437.
34. D. MacKenzie, An Engine, Not a Camera: How Financial Models Shape Markets (Cambridge, MA: MIT Press, 2006), 211–242.
35. G. F. Davis and M. S. Mizruchi, “The Money Center Cannot Hold: Commercial Banks in the US System of Corporate Governance,” Administrative Science Quarterly 44 (June 1999), 215–239.
36. The following is based on Goldstein and Fligstein, “The Transformation of Mortgage Finance.”
37. K. Grind, The Lost Bank: The Story of Washington Mutual—the Biggest Bank Failure in American History (New York: Simon & Schuster, 2012).
38. A. Blundell-Wignall, P. Atkinson and S. H. Lee, “The Current Financial Crisis: Causes and Policy Issues,” OECD Financial Market Trends (2008). As the authors stress, “2004 is critical in thinking about causality.”
39. W. Poole, “The GSEs: Where Do We Stand?,” Federal Reserve Bank of St. Louis Review 95 (November/December 2013), 601–611.
40. An outstanding introduction to the economics of structured finance and the crisis generally is A. Milne, The Fall of the House of Credit: What Went Wrong in Banking and What Can Be Done to Repair the Damage? (Cambridge: Cambridge University Press, 2009).
41. Summarizing the safe assets shortage literature, R. J. Caballero, E. Farhi and P. Gourinchas, “The Safe Assets Shortage Conundrum,” Journal of Economic Perspectives 31 (Summer 2017), 29–46.
42. D. Clement, “Interview with Gary Gorton,” Federal Reserve Bank of Minneapolis, December 1, 2010.
43. G. Gorton, “The History and Economics of Safe Assets” (NBER Working Paper 22210, April 2016).
44. Goldstein and Fligstein, “Transformation”; V. V. Acharya, P. Schnabl and G. Suarez, “Securitization Without Risk Transfer,” Journal of Financial Economics 107 (2013), 515–536; and E. Engelen et al., After the Great Complacence: Financial Crisis and the Politics of Reform (Oxford: Oxford University Press, 2011), 61.
45. Tett, Fool’s Gold, 124–143.
46. V. V. Acharya, P. Schnabl and G. Suarez, “Securitization Without Risk Transfer.”
47. T. Adrian and H. S. Shin, “Financial Intermediaries and Monetary Economics,” Federal Reserve Bank of New York Staff Reports 398 (revised May 2010).
48. T. Adrian et al., “Repo and Securities Lending,” Federal Reserve Bank of New York Staff Reports 529 (revised February 2013).
49. G. B. Gorton and A. Metrick, “Who Ran on Repo?” (NBER Working Paper 18455, October 2012).
50. E. Callan, “Lehman Brothers—Leverage Analysis,” Lehman Brothers, April 7, 2008, https://web.stanford.edu/~jbulow/Lehmandocs/docs/DEBTORS/LBEX-DOCID%201401225.pdf.
51. S. Olster, “How the Roof Fell In on Countrywide,” Fortune, December 23, 2010.
52. Ibid.
53. Engelen et al., After the Great Complacence, 56.
54. https://web.archive.org/web/20090226105739/http://oversight.house.gov/documents/20081022112154.pdf.
55. “Ker-ching: The Thorny Issue of Bankers’ Bonuses,” Economist, January 26, 2008.
56. A. Haughwout et al., “‘Flip This House’: Investor Speculation and the Housing Bubble,” Liberty Street Economics (blog), Federal Reserve Bank of New York, December 5, 2011.
57. R. G. Rajan, “Has Financial Development Made the World Riskier?” (NBER Working Paper 11728, November 2005).
58. M. D. Knight, “General Discussion: Has Financial Development Made the World Riskier?,” Kansas City Federal Reserve, 2005, https://www.kansascityfed.org/publicat/sympos/2005/pdf/GD5_2005.pdf.
59. E. Helleiner, States and the Reemergence of Global Finance: From Bretton Woods to the 1990s (Ithaca, NY: Cornell University Press, 1996).
60. D. Rosato, “Confessions of a Former Real Estate Bull,” CNN Money, January 6, 2009.
61. D. Lereah, Why the Real Estate Boom Will Not Bust (New York: Crown, 2005).
62. L. Kudlow, “The Housing Bears Are Wrong Again,” National Review, June 20, 2005.
63. Acharya, Schnabl and Suarez, “Securitization Without Risk Transfer.”
64. E. R. Morrison and J. Riegel, “Financial Contracts and the New Bankruptcy Code: Insulating Markets from Bankrupt Debtors and Bankruptcy Judges,” American Bankruptcy Institute Law Review 13 (2005), 641–644.
65. H. M. Schwartz, Subprime Nation, 180.
66. “Shorting Home Equity Mezzanine Tranches: A Strategy to Cash In on a Slowing Housing Market,” Deutsche Bank, February 2007, http://www.valuewalk.com/wp-content/uploads/2015/05/2007_Subprime_Shorting-Home-Equity-Mezzanine-Tranches-1.pdf.
67. M. Nakomoto and D. Wighton, “Citigroup Chief Stays Bullish on Buy-outs,” Financial Times, July 9, 2007.
CHAPTER 3: TRANSATLANTIC FINANCE
1. The phrase “Bush’s feral capitalism” comes from Robin Cook, Tony Blair’s former foreign secretary; see R. Cook, “A Strong Europe—Or Bush’s Feral US Capitalism,” Guardian, October 28, 2004.
2. “Lessons from a Crisis,” Economist, October 2, 2008.
3. “Le discours de Nicolas Sarkozy à Toulon,” Le Monde, September 25, 2008.
4. S. Zedda, “Italian Banks’ Paths Through the Crisis,” Scientific Research, March 2016.
5. B. Setser, “Too Chinese (and Russian) to Fail?,” Follow the Money (blog), Council on Foreign Relations, July 12, 2008; and Schwartz, Subprime Nation, 101–104.
6. C. Bertaut, L. P. DeMarco, S. Kamin and R. Tryon, “ABS Inflows to the United States and the Global Financial Crisis,” Journal of International Economics 99 (2012), 219–234; and B. Bernanke, C. Bertaut, L. DeMarco and S. Kamin, “International Capital Flows and the Returns to Safe Assets in the United States, 2003–2007” (International Finance Discussion Papers, 2011).
7. D. O. Beltran, L. Pounder and C. Thomas, “Foreign Exposure to Asset-Backed Securities of US Origin” (International Finance Discussion Papers 939, August 2008, table 6, line 6).
8. Bank of England, Financial Stability Report (October 22, 2007), table 2.14.
9. M. Lewis, The Big Short: Inside the Doomsday Machine (New York: W. W. Norton, 2010); and United States Senate Permanent Subcommittee of Investigations, “Wall Street and the Financial Crisis: Anatomy of a Financial Collapse,” April 13, 2011.
10. HSBC, “Fact Sheet,” April 2005, http://www.banking.us.hsbc.com/personal/pdf/fact_sheet_4-05.pdf [inactive].
11. M. Zaki, UBS, les dessous d’un scandale: Comment l’empire a
ux trois clés a perdu son pari (Lausanne: Favre Sa, 2008), 121.
12. “Deutsche Bank to Acquire MortgageIT Holdings, Inc.,” Deutsche Bank, July 12, 2006.
13. V. Acharya and P. Schnabl, “Do Global Banks Spread Global Imbalances? The Case of Asset-Backed Commercial Paper During the Financial Crisis of 2007–09,” Jacques Polak Annual Research Conference, November 5–6, 2009.
14. N. Baba, R. N. McCauley and S. Ramaswamy, “US Dollar Money Market Funds and Non-US Banks,” BIS Quarterly Review, March 2009.
15. H. S. Shin, “Global Banking Glut and Loan Risk Premium,” Jacques Polak Annual Research Conference, November 10–11, 2011.
16. Bertaut et al., “ABS Inflows to the United States and the Global Financial Crisis.”
17. T. Norfield, The City: London and the Global Power of Finance (London: Verso, 2017); D. Kynaston, City of London: The History, vol. 4 (London: Penguin, 2002); and N. Shaxson, Treasure Islands: Uncovering the Damage of Offshore Banking and Tax Havens (New York: St. Martin’s Press, 2012).
18. E. Helleiner, States and the Reemergence of Global Finance: From Bretton Woods to the 1990s (Ithaca, NY: Cornell University Press, 1996).
19. J. Green, “Anglo-American Development, the Euromarkets, and the Deeper Origins of Neoliberal Deregulation,” Review of International Studies 42 (2016), 425–449.
20. P. Augar, The Death of Gentlemanly Capitalism: The Rise and Fall of London’s Investment Banks (London: Penguin, 2000).
21. The office was inherited by Lehman from Enron in 2001, https://en.wikipedia.org/wiki/25_Bank_Street.
22. “Triennial Central Bank Survey: Report on Global Foreign Exchange Market Activity in 2010,” Monetary and Economic Department, Bank for International Settlements, December 2010, http://www.bis.org/publ/rpfxf10t.pdf.
23. L. Jones, “Current Issues Affecting the OTC Derivatives Market and Its Importance to London,” City of London, April 2009, https://www.cityoflondon.gov.uk/business/economic-research-and-information/research-publications/Documents/research%202009/Current%20issues%20affecting%20the%20OTC%20derivatives%20market%20and%20its%20importance%20to%20London.pdf.
24. G. Morgan, “Supporting the City: Economic Patriotism in Financial Markets,” Journal of European Public Policy 19 (2012), 373–387.