Joseph Stiglitz is the 2001 winner of the Nobel Prize in economics and recent author of Freefall: America, Free Markets and the Sinking of the World Economy. With a pedigree like that, I expected a lot out of the book, but feel he did too much armchair quarterbacking and moralizing to make this a very good read. Sure, the denizens of finance have feathered their nests with some of the TARP money and Mr. Stiglitz and I both think that something should be done about it, but he tended to grandstand too much about the sandbagging the bankers gave us. This is not to say the book is without merit and I like the way he advocates for the under privileged, but this guy is a Nobel Prize winner. I wanted more from someone of his stature. Despite his ankle biting at all the shortsighted behavior on Wall Street, he does come out with some great observations like: "Only executives in financial institutions seem to have walked away with their pockets lined - less lined if there had been no crash, but still better off than, say, the poor.".
Stiglitz really gives it to the banking tycoons with both barrels: "The bankers gave no thought to how dangerous some of the financial instruments were to the rest of us, to the large externalities that were being created. In economics, the technical term externality refers to situations where a market exchange imposes costs or benefits on others who aren't party to the exchange.". In a later chapter he expounds on this issue once more: "When gambling - speculating - on corn, gold, oil, or pork bellies didn't provide enough opportunities for risk-taking, they invented 'synthetic' products, derivatives based on these commodities. Then, in a flurry of metaphysical ingenuity, they invented synthetic products based on synthetic products.". Freefall leaves nothing in doubt as to where it stands on the issues: "The world had changed, or so the financial whiz kids had convinced themselves. They thought they were so much smarter, so much savvier technologically.". And finally: "Bankers are (for the most part) not born any greedier than other people. It is just that they may have more opportunity and stronger incentives to do mischief at others' expense.".
Mr. Stiglitz offers some solutions to the problems the banking system is experiencing, like reinstating the Glass-Steagall Act or something to the equivalent (which the Obama administration has attempted to do last week with the Volker Rule), but never quite convinces me he is the authority on the subject because I've read it all before from different economists. And this is the problem with Freefall, it's all been said by some of his colleagues in a more definitive way. When I'm reading a finance or economics book, I'm looking for ways to increase my portfolio and although Stiglitz cautions about the imminent collapse in commercial real estate, lingering problems with residential real estate and credit card debt, he really doesn't go far enough. You really have to slog through a lot of material to get to what you are looking for and to me, that's just not good enough. Unless you are an academic, I would skip this one.