By Ross Kerber.
University economists are already teaching courses on the history of the financial crisis of 2008 and the policy responses that followed. Robert Pozen’s new book could become required reading.
“Too Big to Save? How to Fix the U.S. Financial System” (Wiley, $29.95), provides both a detailed look at the run-up to the financial system’s brush with disaster and many prescriptions in response.
Most books about the nation’s financial crisis tell us what happened. In his new book, HBS senior lecturer Robert Pozen tells us how to fix the system. A financial industry veteran and chairman of MFS Investment Management, a Boston firm that oversees more than $170 billion in pension and mutual funds, Pozen writes with authority and unusual clarity about complex issues in Too Big to Save? How to Fix the U.S. Financial System (Wiley).
Written by Elizabeth Leonard.
Comprehensive in scope, Too Big to Save looks at each of the factors that played a role in the crisis: the housing boom, subprime loans and the impact of mortgage-backed securities; Fannie Mae and Freddie Mac; credit default swaps, AIG and collateralized debt obligations; hedge funds and short selling; and capital requirements. But this is not an alphabet soup. These topics are precisely defined and clearly presented in a highly readable and well-paced narrative. Moreover, as Pozen explains the forces that were at work to disable the U.S., and then global, economy, he presents a series of constructive approaches to righting the financial system.
From Brad DeLong’s Egregious Moderation:
The best finance book I’ve read so far this year (and I’ve read a slew of them) is Robert C. Pozen’s Too Big to Save? …
In short, what we have here is the book that every business/finance professor wants needs. Not to assign to his students: nothing to vulgar as that. What you do with Pozen is stuff it in your top drawer and sneak a peek whenever you want to look brilliant. I can’t think of anybody who has covered such a range of issues so efficiently or so well.
Reviewed by Robert J. Hughes
To everyday consumers, “too big to fail” has become a dubious mantras. Where is the fairness in a government bailout of large banks and corporations that leaves regular people wondering when things are going to turn around for them.
Here, author Pozen, chairman of MFS Investment Management, a lecturer at Harvard Business School and a contributor to The Wall Street Journal, provides an analysis of the financial arrangements the government has used to bolster the economy, with proposals for shaping the economic landscape, all of which may help investors better understand the shifting marketplace. (SmartMoney is a joint venture between Dow Jones and Hearst. The Wall Street Journal is a unit of Dow Jones.)
In four parts and 14 chapters, Pozen details complex economic issues in clear prose: the U.S. housing slump and its affect on the global financial crisis; the slump’s impact on stock and bond markets; last year’s bailout of financial institutions, and the future of the American financial system.
This is a book for investors who want to understand the details of our financial landscape, and who also want to consider arguments on restricting mortgage-lending practices, whether financial derivatives and hedge funds should be regulated or the revival of loan securitization, among others. Pozen also includes a helpful glossary of terms that should help even seasoned investors.
by Felix Salmon
“I had a very interesting conversation with Bob Pozen yesterday evening; his new book is out now, and I highly recommend it. It’s the first crisis book to make a detailed series of specific recommendations about what needs to be done going forwards — or, in the words of the book’s subtitle, ‘how to fix the US financial system’.”
In his new book, Too Big to Save?, Robert Pozen proposes fixes for the biggest financial crisis of our lifetimes.
Review By Alisa Greenstein
“Robert Pozen, Chairman of MFS Investment Management, offers an insightful examination of the causes of the current global financial crisis in his new book “Too Big To Save? How to Fix the U.S. Financial System.” Pozen’s text provides a detailed framework to analyze the abundance of information about the financial crisis, to avoid repeating the mistakes of the past and to create an effective plan for fixing the financial system in the future. In part one of his book, Pozen lays blame for the collapse of the financial system on the bursting of the U.S. housing bubble. The bubble, he explains, resulted from excessive debt spread globally by mortgage securitization, which allowed lenders to easily obtain cash to make more loans. When the mortgages underlying these securities began to default and later reached record highs, even the most conservative investors in mortgage-backed securities suffered heavy losses. After describing the origins of the financial crisis, Pozen’s book explains in parts two through four: (1) the government’s correct and incorrect decisions in responding to this financial crisis; and (2) the actions it still must take to resolve the financial crisis and prevent its recurrence. With regard to the latter, he recommends that the least burdensome regulatory strategy would be the government’s best chance of success. In particular, he suggests that Congress should focus on encouraging financial innovation and on coping with systemic risks, specifically with regard to regulating hedge funds. We offer a detailed summary and review of Pozen’s book.”