SOCIAL & BEHAVIORAL SCIENCES

Economics

Plunder and Blunder: The Rise and Fall of the Bubble Economy

This short volume is a succinct, scathing indictment of the complicity of executives of financial institutions, the regulators of these institutions, and professional economists in creating the current financial crisis. Baker (co-director, Center for Economic and Policy Research) convincingly argues that the financial chaos wrought by the housing bubble could have been predicted and easily prevented. The inability, or unwillingness, of leading economists and industry regulators to recognize the extent of the bubble and their refusal to act to prevent its subsequent bursting is nothing short of criminal, in his view. Deregulation of the financial industry starting in the early 1980s led to the excesses that ultimately resulted in the tech stock and housing bubbles and busts. Baker’s suggestions to prevent future crises include Fed officials laying out evidence in public testimony on potential financial bubbles; greater restrictions on bank lending for risky mortgage loans; requiring that independent auditors, appraisers, and credit-rating agencies be chosen by independent bodies and not be beholden to those who pay them; and maintaining a lower dollar value. See related, Robert Shiller’s The Subprime Solution (CH, Dec ’08, 46-2206), Mark Zandi’s Financial Shock (CH, Dec ’08, 46-2210), and Paul Muolo’s Chain of Blame (CH, Jan ’09, 46-2794). Summing Up: Recommended. All levels of undergraduate students; general readers. D. C., Lynchburg College