Review of ECONned, by Yves Smith
Out the gate, I was fully prepared to dislike this book (ECONNED: How Unenlightened Self Interest Undermined Democracy and Corrupted Capitalism). While I occasionally peruse Ms. Smith’s excellent econ/finance site, Naked Capitalism, I have often considered some of her comments to be soft pedaling the economic crises of our times.
But, I have to admit her attitudes have been evolving to my way of thinking, and her masterful book is a stunner and a real joy to behold!
Madam Smith’s treatment of the Brooksley Born saga is the best I’ve read yet, and I humbly believe I have read them all. Ms. Born, a top notch derivatives attorney from the Washington, D.C. powerhouse law firm of Arnold Porter, was appointed to chair the Commodity Futures Trading Commission during the Clinton Administration.
How Ms. Born was halted from performing her rightful function in that position by the likes of Robert Rubin, Alan Greenspan and Arthur Levitt (the true villains and criminals, and make no mistake about that) is well worth the price of the book (and at $30 a pop, it ain’t cheap in these times we economically struggle to survive in).
And the recent mea culpa by Levitt in ignoring and circumventing Brooksley Born’s warnings of the coming debacle, is akin to the bank robber who murders a teller during his crime remonstrating that he had a bad day!
Among the extraordinary important details Ms. Smith mentions, is that Mark Brickell, the head of the International Swaps and Derivatives Association during that period, was responsible for writing portions of the Commodity Futures Modernization Act. Not a fact to be ignored.
Yves makes a most compelling point in her book about the fundamental similarity between securitization, repos (repurchases), and credit default swaps. (Now, as she is one of the those rare ones to point this out, I cannot criticize her, but I do differ a bit in believing that fundamentally speaking, securitizations, credit derivatives [including credit default swaps, actually more an unregulated insurance instrument than a derivative – although classified as such], leveraged buyouts and hedge funds are all the same financial construct, and equally damaging to anyone’s economy and tax base.)
She cogently points out that credit default swaps aren’t technically derivatives, but classified as such so they could go unregulated. Hence those synthetic CDOs with underlying credit defaults swaps: super securitizations or leveraging to the max!
Ms. Smith, with equal brilliance, details the annals of “creative accounting” utilized to implement so much of the corrupt, criminal practices which have insured a crippled economy for decades to come. During the final portion of her book she realistically and most accurately describes how the government stepped in to continue the structured looting of the public for the benefit of the criminal class of Wall Street.
ECONned is a colossal achievement, both in scope of detail and recent history, as well as an excellent response to those corporate cheerleaders who have given us nothing but soporifics in support of those “wise men of Wall Street” who pulled us back from the abyss (I’m referring to a book by the the NY Times’ shill, whose name I refuse to mention, as I’ll refrain from mentioning all those other Wall Street-financed excuses for financial history diatribes) and other such drivel and nonsense.
Yves Smith’s final analysis, reform being an impossibility – given our present state of corrupt politicians, and so forth, is refreshing in its honesty and clear headedness.
Recently, at her blog site Yves Smith ran an insightful piece demolishing some of the premises of Michael Lewis’s recent book, The Big Short. (I can’t help but agree with her assessment; skip his book, and simply read Anna Katherine Barnett-Hart’s excellent thesis paper on the subprime meltdown which Michael used as one of his primary sources.)
All in all, I would recommend three books as definite reads for anyone and everyone wishing to understand the present and future state of the American, and perhaps global, economy:
These three books will basically cover all the important bases and contribute mightily to one’s understanding of these circumstances we are now in.
Perhaps one can still find a non-finance job in the finance sector, such as a Special Bank Assassin for JP Morgan Chase. Given a recent news story, they could certainly use some competence in that category. (Just being unduly witty here, I wish any and all whistleblowers and fellow truth seekers utmost safety and hope they haven’t suffered!)
Smith, Yves. Palgrave Macmillan (2010). ECONned. ISBN: 978-0-230-62051-3