HOW AMERICA ALMOST TOOK DOWN THE WORLD

Alan S. Blinder, After the Music Stopped: The Financial Crisis, the Response, and the Work Ahead (New York: The Penguin Press, 2013) ("'When the music stops ... things will be complicated. But as long as the music is playing, you've got to get up and dance. We're still dancing.' Those were the immortal words on July 8, 2007, of Chuck Prince, then CEO of Citigroup. It may be the most famous, or infamous, quotation of the entire financial crisis. Almost exactly a month later, the music stopped abruptly--and so did the dancing." Id. at xv. "THE TEN FINANCIAL COMMANDMENTS: So, what are some of the key principles for finance going forward? According to an old joke, there are three secrets to designing a safe and sound financial system---the problem is that nobody knows what they are. Let me instead try to encapsulate the major financial lessons form the crisis into ten commandments for the future of finance. 1. Thous shalt Remember That People Forget.... 2. Thou Shalt Not Rely on Self-Regulation.... 3. Thou Shalt Honor Thy Shareholders..... 4. Thou Shalt Elevate the Importance of Risk Management.... 5. Thou Shalt Use Less Leverage.... 6. Thous Shall Keep It Simple, Stupid.... 7. Thou Shalt Standardize Derivatives and Trade Then on Organized Markets.... 8. Thou Shalt Keep Things on the Balance Sheet..... 9. Thou Shalt Fix Perverse Compensation Systems.... 10. Thou Shalt Watch Out for Ordinary Consumer-Citizens...." Id. at 433-437. From the bookjacket: "With bracing clarity, Blinder shows us how the U.S. financial system, which had grown far too complex for its own good--and too unregulated for the public good--experienced a perfect storm beginning in 2007. Things started unraveling when the much-chronicled housing bubble burst, but the ensuing implosion of what Blinder calls the bond bubble was larger and more devastating. Some people think of the financial industry as a sideshow with little relevance to the real economy--where the jobs factories, and shops are. But finance is more like the circulatory system of the economic body: If the blood stops flowing, the body goes into cardiac arrest. When America's financial structure crumbled, the damage proved to be not only deep, but wide. It took the crisis for the world to discover just how truly interconnected--and fragile--the global financial system is."  "Some observers argue that large global forces were the major culprits of the crisis. Blinder disagrees, arguing that the problem started in the United States and spread abroad, as complex, opaque, and overrated investment products were exported to a hungry world, which was nearly poisoned by them. The second part of the story explains how American and international government intervention kept us form a total meltdown, Many of the U.S. government's action, particularly the Fed's, were previously unimaginable. And to an amazing--and certainly misunderstood--extent, they worked. The worst did not happen." Blinder offers clear-eyed answers to the questions still before us, even if some of the choices ahead are as divisive as they are unavoidable. After the Music Stopped is an essential history that we cannot afford to forget because history teaches that it could happen again.".).