Too Big to Save? How to Fix the U.S. Financial System

Today's debate about the financial crisis has resulted in too much finger pointing and not enough solutions. At last there is a book that moves beyond the blame game to propose an action plan to fix the current mess and prevent another in the future: TOO BIG TO SAVE?: How to Fix the U.S. Financial System (Wiley; November 2009; $29.95) by Robert Pozen. Richard Posner calls is "a detailed yet thoroughly lucid and accessible study of the financial crisis... and more important, the best critique I have seen of the government’s responses to the crisis and its recent blueprint for financial regulatory reform.” 

Widely recognized for his leadership in both finance and economic policy, Robert Pozen takes federal policymakers to task for spending huge sums of money with too few benefits for America's taxpayers. Instead, he urges our government to rein in its bailouts, stop buying toxic assets, and provide more incentives for the private sector to regulate itself.  Pozen argues that:   

• The key to our economy’s recovery is the revival of loan securitization
• Broad-based legislative restrictions on executive compensation tend to backfire
• Fair value accounting did not cause the financial crisis and should mostly be retained
• International cooperation won’t do much to prevent future financial crises
• Regulatory gaps should be closed without creating omnibus agencies

Within a sweeping analysis, TOO BIG TO SAVE? chronicles the collapse of our financial system, one domino at a time from mortgage-backed securities to stock markets, from money market funds to recapitalized banks, and from the SEC's mistakes to international protectionism. Pozen then suggests how the securitization process should be reformed, assesses the impact of the financial crisis on the stock and bond markets, and evaluates the federal bailout of financial institutions by buying their stock and toxic assets. He shows how these bailouts constitute “one-way capitalism” whereby taxpayers bear most of the losses but receive few gains.

Shifting the focus from yesterday's mistakes to realistic solutions that the U.S. Treasury, Congress, the G20, and America’s business leaders can and should take now, TOO BIG TO SAVE? points the way to a more secure economic future by drawing a blueprint for reform. 

“When Bob Pozen talks, people listen—with good reason. This book is full of wisdom about the flaws in our financial system that let the crisis develop and, more important, detailed prescriptions for fixing it. Read it. Then keep it on your desk as a reference.” 

— Alan S. Blinder, Former Vice Chairman, Federal Reserve Board, Gordon S. Rentschler