Hal S. Scott

A pretty technical and current book. The main thesis is that contagion (the indiscriminate run of short term lenders) caused the crisis by creating a balance sheet effect (fire sales of assets to meet collateral requirements depress asset values more leading to a cycle), not connectedness (the exposure of institutions to one another), and that Dodd Frank has made the risk of the same events happening again worse by limiting the lender of last resort functions of the Federal Reserve.

It's a good read for someone who has a technical interest in the crisis and Dodd Frank, and backed with a flood of technical facts. For example, the book argues that connectedness would not have caused the banks to collapse at the failure of lehman, since obligations were collateralized, there was a market of insurance and the net exposure would not have been enough to wipe out any counterparties. The idea is that contagion, an indiscriminate fear caused short term lenders to run against institutions which created the crisis of 2008. The book argues that the Fed, FDIC and treasury department handled 2008 accordingly by lending money to banks, as well as mutual funds. However, Dodd Frank curtailed a lot of these lending powers by banning the Fed from lending to non-banks without the approval of the secretary of state, and adding additional disclosure and generality requirements that other central banks do not have. The ex ante measures in Dodd Frank, such as liquidity and capital requirements are not enough to deal with a true crisis and the orderly liquidation authority has never been tried before. The political taboo of bailouts has made such problems harder and harder to fix.

The book gets very technical and much of the data may be stale in a few years, however, it's a great read for anyone tired of simple narratives and wants to look into an in-depth exploration of the crisis.… (meer)