Financing Failure

“Paulson, Geithner, and Bernanke told the American public a pack of lies and misrepresentations during the subprime crisis. Where other authors merely parroted these untruths, Vern McKinley calls them on it in this very carefully researched book. Financing Failure shows us the appalling lack of logic in regulators' responses to financial crises and how, sadly, we can expect more of the same in the next crisis. McKinley has produced an excellent history of the flawed analysis of financial crisis policy of the last century.”

“Reading Vern McKinley’s Financing Failure will lead you to a logical conclusion: Failure should be allowed to happen just as success should be allowed to happen. Mr. McKinley demonstrates not only that we have gone to great extremes to keep failure from happening, but also to protect the turf of the regulators who have intervened to keep it from happening. We have done this by putting at risk great sums of public funds and by creating fear in the public mind on the consequences of financial failure. To get a balanced view of the experience we are still going through, this book is a must read.”

“This is a phenomenal, detailed policy review of American bank bailouts from the 20th century onward, with a specific focus on the most recent crisis and its aftermath.... Underneath a wealth of interesting detail, McKinley identifies a ‘corporatist’ agenda supported by what might be called the coalition of the self-important: (1) Big banks (2) Regulators and (3) Politicians.... Throughout the crisis, McKinley was one of the few people who was trying to figure out what the policy-makers were actually doing, as opposed to imbibing thoughtlessly conventional narratives about what went wrong (embodied in the FCIC report and its dissents). On a moral level, when you consider, as McKinley does here, that the same regulatory agencies that precipitated the crisis gained power during the lawmaking period designed to remediate it, it is clear that we are far from addressing the financial and economic instability characteristic of our modern political order. Going forward, I suspect I will be returning to this book often. Well done.”

“McKinley argues that few if any of the financial bailouts by the U.S. government over the past century were justified. What appears to regulators and central bankers as liquidity problems are almost always rooted in solvency problems, and unsound institutions should be closed. Regulators justify bailouts with predictions of financial turmoil, but McKinley doubts the accuracy of these predictions and has used the Freedom of Information Act to search for the analysis behind them... the author finds little more than gut feelings backing dire warnings... Bailouts encourage moral hazard among financial institutions, reducing the incentives to limit risk, but McKinley argues also that the interventions and the rhetoric used to justify them contribute to the uncertainty that policy makers want to dampen... McKinley agrees that there was regulatory failure, but contends that the fault was that of regulators and policy makers, not insufficiency of regulatory authority. Financing Failure is a timely addition to the debate over bailouts. Recommended.”

“Vern McKinley’s analysis of the recent bailouts of the financial institutions includes the most comprehensive research of the actual underlying discussions that I have seen. The book raises important concerns about the basis of several of the government’s decisions which effectively reallocated tremendous amounts of the nation’s wealth. It is also startling to note how little transparency that the analysis behind these institutional and governmental bailout actions has received to date. This track record of government intervention does not inspire confidence that the Dodd-Frank legislation will lead to better outcomes in the future.”