After the Music Stopped Pdf Summary Reviews By Alan S. Blinder

After the Music Stopped Pdf Summary

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. 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, to its horror, just how truly interconnected-and fragile-the global financial system is. The second part of the story explains how American and international government intervention kept us from a total meltdown. Many of the U.S. government’s actions, 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 one thing history teaches is that it will happen here again.


After the Music Stopped Review

Alan F. Sewell

3.0 out of 5 stars A narrow view of the financial collapse
Reviewed in the United States on January 27, 2013

Verified Purchase

The financial collapse of 2008 and the ongoing anemic recovery is such a politically-charged issue that it is difficult to find anyone who can analyze it objectively.

Free market Conservatives spin it as a financial collapse brought on by TOO MUCH government regulation: “The government, through its Community Reinvestment Act, wrecked the economy by forcing banks to loan money to unqualified borrowers. Now the government is debilitating the banks by imposing the Dodd-Frank and Sarbanes-Oxley regulations on them.” Of course free market Conservatives will never admit of the possibility that the free market may have failed because of its own deficiencies in self-regulation.

The Democrats, too, have been silent because they are as much tied in with financial interests as the Republicans. The Democrats recruit their Secretaries of the Treasury from the big banks the same as the Republicans do, and rely every bit as much as Republicans on financial institutions for campaign contributions. Thus, the Democrats have refrained from taking any sort of “blame the banks” line. They HAVE led the effort to impose very modest regulations on the banks like Dodd-Frank and Sarbanes-Oxley, but have otherwise hoped that the financial crisis will die down quickly before it tarnishes THEIR reputations.

As much as the Republicans and Democrats yell and scream at each other in public, they are as united as a band of brothers in hushing up discussion of the financial collapse.

Thus, what is needed is an objective, non-partisan look at the financial crisis with a view towards making the necessary reforms to minimize the possibility of another financial collapse. Although author Alan Blinder advises Democratic administrations, his many articles in business journals have always seemed to me to be driven more by an objective search for truth than partisanship.

Blinder explains his objective in writing the book:

Another aspect of the crisis motivates this book: Even today, despite numerous works on the crisis– some of them excellent– most Americans remain perplexed by what hit them. They have only a limited understanding of what the U.S. government did, or failed to do, on their behalf– and, more important, why. They also harbor several major misconceptions. In consequence, the Tea Party movement erupted in 2009, voters “threw the rascals out” in the elections of 2010, Occupy Wall Street exploded in 2011, economic issues were central to the hotly contested election in 2012, and trust in government is still scraping all-time lows.

More concretely, I want to provide answers to the following three critical questions:

How Did We Ever Get into Such a Mess? The objective here is not to affix blame…but rather to highlight and analyze the many mistakes that were made so we don’t repeat them again.

What Was Done to Mitigate the Problems and Ameliorate the Damages– and Why?

Did We “Waste” the Financial Crisis of 2007- 2000 or Did We Put It to Good Use?

As an investor in real estate investment trusts, I was near dead-center of this crisis as it developed through 2007 to the present. Although I agree with much of Blinder’s take, I also come to different conclusions on some points:

Blinder says:

My point here is not to argue that bankers were foolish– especially since the bursting of the bond bubble caught so many other people by surprise, too. In fairness, no one should have been expected to foresee accurately the truly unprecedented collapse of the residential mortgage market. It was bigger than your worst nightmare.
I disagree. The bankers WERE foolish not to see the bubble coming. In 2006 and 2007 real estate prices were rising as much as 50% in SIX MONTHS in areas like Orlando. I saw “trouble” everywhere in the real estate market in Florida and got to work paying off my mortgage BEFORE the financial collapse hit. On a lark my wife and I toured an open house in Bradenton, Florida back in 2006. The homebuilder assured me that he would put me in touch with a banker he knew who would loan me $750,000 to buy a newly constructed house. This was about three times the amount a responsible lender would have loaned. I also saw first-hand several corrupt real estate transactions whereby mortgage originators, banks, real estate agents, and homebuilders colluded to inflate property values above fair value in order to extract money from the deal and spread it around among themselves as kickbacks.

Anybody who was involved in real estate in 2006 and 2007 should have known that the industry had become unsound. The big banks and loan companies piled into the locally-originated corruption and propagated it with CDO’s that were levered 30 to 1 and failed as soon as the first couple of homeowners became delinquent in their loans. They knew what they were doing and chose to ignore the risks they were taking with their customers’ money. Actually, there were some mid-size banks who understood exactly what was going on and refused to have any part of it. My regional bank in Florida did not lower its lending standards when every other mortgage company did, and as a result they claim not to have suffered any excess of failed loans during the collapse. If they understood what was going down, then others, especially the biggest and supposedly savviest banks, could have seen it IF THEY HAD WANTED TO SEE IT.

I also disagree with Blinder’s assertion:

The years 2000 and 2007, especially the latter, are not ancient history. Ask yourself what could possibly have changed so fundamentally about the U.S. labor market in six years to consign us to permanently higher unemployment? My answer is straightforward: nothing. There is not a single reason to believe that we cannot get back to within shouting distance of 5 percent unemployment again.

Because Blinder is an academic he may be out of touch with the real world of employment. Our balance-of-trade deficits indicate that approximately 4.6 million jobs have permanently been lost due to offshoring manufacturing to China and another 1 million have been lost due to the relocation of American factories into Mexico. There have also been massive waves of mergers and acquisitions whose primary purpose is to “cut costs” by eliminating jobs.

Depending upon one’s viewpoint, the jobs elimination by {offshoring, downsizing, rightsizing, early retirement, work force reduction, re-engineering} may be considered good or bad, necessary or gratuitous. But its effect on diminishing employment cannot be denied. Labor force participation peaked in 1999, nearly a decade before the onset of the Great Recession in 2008. After 1999 many of our companies were eliminating jobs faster than they were creating them.

Thus we had Fed Chairman Alan Greenspan lowering interest rates to near-zero to try to solve an EMPLOYMENT problem. The offshoring of American industry removed opportunities to invest in growing the economy the right way by expanding the means of employment by building AMERICAN factories that employ AMERICAN workers

We therefore began a diversion of capital away from productive industry and into excessive real estate speculation at precisely the time when the American workers were losing their jobs and therefore the means to pay for the mortgages on their expensive properties. The financial institutions chose to put their heads in the sand, and continued profiteering and paying themselves bonuses until the real estate speculations blew up in their faces and rendered them insolvent. At that point they ran to the government for bailouts with taxpayer money.

This book thoroughly explains the NARROW fault in the economy, which has to do with too many people being loaned too much money to buy too much over-priced real estate on too much leverage. It thoroughly explains the poisons that the financial industry cooked up via credit default swaps (CDS’s), collateralized debt obligations (CDO’s), and “crazy compensation schemes” that paid mortgage originators to lend money to non-creditworthy applicants.

However, Blinder fails to address what I see as the BROADER problem, which is the rapid elimination of American employment. IMO the COMPLETE cause of the economic collapse was: Jobs elimination –> high unemployment –> low interest rates –>excessive real estate and stock market speculation.

Thus, the economy isn’t likely to “bounce back” to full employment as rapidly as Blinder expects, because the capacity of the American economy to employ every job seeker had been diminished BEFORE the financial crisis materialized in 2008. The financial crisis was the child of the dis-employment of the American middle class, not its father.

Jim Wilder

5.0 out of 5 stars Macroeconomics Is Complicated
Reviewed in the United States on February 22, 2013

Verified Purchase

Blinder has a breezy, conversational style and he explains macroeconomic theory and policy details without being professorial. He points out during the recession of late 2007-2009, “…real GDP fell 4.7 percent. Since trend growth would have been at least 3.5 percent over that period, we probably lost over 8 percent of GDP, relative to trend.” I haven’t heard this discussed by the politicians. Blinder explains how the risks leading up the crisis in mortgage debts were greatly magnified by Credit Default Swaps, which were supposed to spread risk and reduce its effects. Blinder explains the frailties of the “House of Cards” – the title of Chapter 3, which made up the U.S. financial system and details the main “villains” – bubbles, leverage, lack of regulation enforcement, “disgraceful practices in subprime mortgage lending”, “complexity run amok”, rating agencies, “crazy compensation systems” of traders, bankers, investment people, etc. Blinder explains how each of these villains had a role in bringing down the house, and along the way points out commonsense fixes, such as “…having simpler securities, … standardizing derivatives, trading them on organized exchanges, and requiring mortgage originators and securitizers to keep some “skin in the game” by retaining ownership of some of the mortgages…” Wall Street firms combined high-leverage with very short term debt, and when this combination failed, it brought down Bear-Stearns, Lehman Brothers, and very nearly Goldman Sachs, Merrill Lynch and Morgan Stanley.

Blinder describes the government’s bailout of these firms: “The Fed and Justice Department approved their applications, with…blazing speed, thereby pulling the two beleaguered companies inside the Fed’s safety net. That stopped the runs.” What’s astonishing is Blinder’s tale of how fast the government can move when necessary. “Bear Stearns, Merrill Lynch, Goldman Sachs, Morgan Stanley, Citigroup, Bank of America, Wachovia, Washington Mutual, Fannie Mae, Freddie Mac, and others had all been rescued, in one way or another, by the federal government. A government led, by the way, by a deeply conservative Republican president, a secretary of the Treasury who hailed from Goldman Sachs and characterized himself as “a firm believer in free markets”, and a professorial Federal Reserve chairman who called himself a libertarian.” (pg. 166) The necessity of the bailouts is arguable and a fault I have with his book is that Blinder cites only one study, one that he co-authored, that compares the effects on the U.S. economy with and without the federal bailouts. I’d like to have seen more evidence in this book that the “let them fall” criers are wrong.

This would have been a worthy read had Blinder stopped after the first four parts. However Part V titled “Looking Ahead” makes this book doubly worth the read. Here Blinder discusses the need for budgetary discipline in the near-, mid-, and long-term. His conclusions are a bit surprising to me. Among them, he states the Democrats will be forced into cutting medical care at some point because raising taxes will not cover the shortfall caused by rising health care costs given his assumption that “Americans are used to federal taxes running about 18.5 percent of GDP; they will not allow them to rise to 32 percent of GDP. Never mind that a number of European countries do so; we won’t. ” (pg. 404) I found it interesting that Blinder rarely mentions his colleague at Princeton, fellow economist Paul Krugman, a Nobel Laureate. Blinder does refer to him a few times, but I would have liked to know what Blinder thinks of Krugman’s policies on Keynesian stimulus spending. There are differences between these two economists in near and long term recommendations that are not brought out in this book.

In the penultimate chapter, Blinder discusses the European debt crisis and its effects on the U.S. and world economies. I was looking for some explanation in this chapter to a point Blinder made earlier, that during the slow recovery, the US unemployment rate and economic performances dropped twice, both times coincident the particularly acute periods of the Greek debt crisis. I wanted to see a hypotheses of why, but I didn’t find it. This dangling thread left me in suspense. Blinder only briefly mentions the Italian debt crisis and doesn’t explore its potential effects. These open points show that this story is not over, unfortunately, as the world’s economies have not climbed out of this crisis as yet. I hope Blinder will write a sequel within the decade, though it will be hard to top this book.

Daniel Hind

5.0 out of 5 stars Excellent and readable book on the financial crisis
Reviewed in the United Kingdom on January 3, 2014

Verified Purchase

This is the first book I have read on the recent “financial criss” and I found it to be easy to read, thorough and highly insightful. Without being an expert on the crisis, I found the book to be extremely thorough in its analysis and it covers very interesting areas from the background and causes of the crisis to the response of the government and private sector as well as outlining a “roadmap” on how future crisis can be avoided.

Mr Blinder’s writing is jargon-free, explains concepts in easy terms, does not assign blame to one partilcular party and outlines balanced and sensible recommendations on the future of Finance.

I would highly recommend the book to anyone who wants an easy-to-read and thorough analysis of the last five years of economic turmoil that has savaged the world.

About Alan S. Blinder Author Of After the Music Stopped pdf Book

Alan S. Blinder
Alan S. Blinder

Alan Stuart Blinder Author Of After the Music Stopped pdf Book, He is an American economist at Princeton University serving as the Gordon S. Rentschler Memorial Professor of Economics and Public Affairs in the Economics Department, and vice chairman of The Observatory Group. He founded Princeton’s Griswold Center for Economic Policy Studies in 1990. Since 1978 he has been a Research Associate of the National Bureau of Economic Research. He is also a co-founder and a vice chairman of the Promontory Interfinancial Network, LLC. He is among the most influential economists in the world according to IDEAS/RePEc, and is “considered one of the great economic minds of his generation.”

Blinder served on President Bill Clinton’s Council of Economic Advisors (January 1993 – June 1994), and as the Vice Chairman of the Board of Governors of the Federal Reserve System from June 1994 to January 1996. 

After the Music Stopped pdf, Paperback, Hardcover Book Information

after the music stopped pdf book
after the music stopped pdf book
  • Publisher ‏ : ‎ Penguin Press; 1st Edition (January 24, 2013)
  • Language ‏ : ‎ English
  • Hardcover ‏ : ‎ 496 pages
  • ISBN-10 ‏ : ‎ 1594205302
  • ISBN-13 ‏ : ‎ 978-1594205309
  • Item Weight ‏ : ‎ 1.7 pounds
  • Dimensions ‏ : ‎ 6.5 x 1.5 x 9.5 inches
  • Best Sellers Rank: #291,239 in Books (See Top 100 in Books)
  • #236 in Economic Policy & Development (Books)
  • #473 in Economic Conditions (Books)
  • #594 in Economic History (Books)
  • Customer Reviews: 4.4 out of 5 stars    334 ratings

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