announcing: a brief history of doom! -- 5/20/19

Today's selection -- from A Brief History of Doom by Richard Vague. 

Dear Readers:

I'm grateful and pleased to report that my new book, A Brief History of Doom, is now available. It is a history of financial crises over the last 200 years: the Great Recession, the Great Depression, and a number of other crises including Britain in 1825, Germany in 1873, the U.S. in 1989, Japan in 1998 and many more. An early reviewer graciously wrote, "A Brief History of Doom is the authoritative historical reference on why financial crises occur, with stunning detail on the six biggest crises in the history of capitalism. It is beautifully written, and manages to combine a strong unifying theme of the role of excessive private debt booms and credit busts with engaging historical detail." Let me thank you all in advance for your interest. It was your purchases of my last book that quickly propelled it to #1 in Amazon in its category. As always, our proceeds will be donated to a children's literacy initiative. Here is a brief excerpt from the book:

Excerpt regarding the late 1980s crisis:

"Many remember the 1980s as a renaissance in the United States. Newly elected president Ronald Reagan and Federal Reserve chair Paul Volcker were cred­ited with defeating the inflation of the 1970s. ... Yet those memories belie stark realities of calamities and crises. The de­cade of the 1980s was one of the most economically turbulent and crisis laden in American history. Indeed, it was perhaps the most chaotic in terms of the number of sectors adversely affected. The results of the period led to more than two thousand bank failures, more than eight hundred savings-and-loan failures, the junk-bond crisis, the commercial real estate crisis, the Latin American debt crisis, and an energy-lending crisis triggered by an oil price collapse. There was even an agricultural lending crisis early in the decade. In each one of these, it was a rapid buildup in private debt that brought the overcapacity and crisis. This decade saw the largest wave of bank failures since the 1930s. And it saw the largest percentage one-day stock market drop in U.S. history, on October 19, 1987, a collapse parried only when the Federal Reserve flooded the market with unprecedented levels of liquidity. ...

"The most dramatic failure of the S&L debacle would come ... with Charles Keating's notorious Lincoln Federal Savings and Loan, though hundreds of failures occurred even after this point. Lincoln was seized in April 1989 and cost the government over $3 billion, while leaving about 23,000 customers with worthless Lincoln Federal bonds. Keating had once urged his staff to 'remember the weak, meek and ignorant are always good targets.' Once he took over Lincoln in 1984, Keating jettisoned existing, conservative management and grew Lincoln from $1.1 billion to $5.5 billion in five short years by lending and by buying land, buying equity in commercial real es­tate development projects, and buying Drexel-sponsored junk bonds.

The Keating Five

"[Charles] Keating, like others in this era, made risky investments and used Lincoln as a personal piggybank. Lincoln exceeded its statutory limits in direct investment -- limits that were designed to cap risk -- by $600 million, but chafed when the [industry regulator] FHLBB began to investigate this and other practices. He en­listed the help of five U.S. senators -- Donald Riegle (D-MI), Dennis DeCon­cini (D-AZ), Alan Cranston (D-CA), John Glenn (D-OH), and John McCain (R-AZ) -- along with Speaker of the House Jim Wright (D-TX) to protect him from the FHLBB in 1987. Keating also hired Alan Greenspan as a lobbyist 'to help recruit the Keating Five.' "

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author:

Richard Vague

title:

A Brief History of Doom

publisher:

University of Pennsylvania Press

date:

Copyright 2019 University of Pennsylvania Press

pages:

63-64
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