Capital Offense: How Washington's Wise Men Turned America's by Michael Hirsh

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By Michael Hirsh

Why each president from Reagan via Obama has positioned Wall highway sooner than major StreetOver the previous couple of many years, Washington’s firmly held trust that in the event you make traders satisfied, a booming economic system will stick with has prompted an financial challenge in Asia, difficulty in Latin the US, and now a serious recession in the US and Europe. How did the easiest and brightest of our time permit this to ensue? Why have those mess ups performed not anything to alter the free-market mantra of the Washington trustworthy? the reply has not anything to do with lobbyists and every little thing to do with ideology. In Capital Offense, veteran Newsweek reporter Michael Hirsh offers us a colourful narrative background of the period he calls the Age of Capital, telling the tale throughout the eyes of its key avid gamers, from Ronald Reagan and Milton Friedman via Larry Summers and Timothy Geithner. •    in accordance with the forged examine and expert reporting of Newsweek Senior Editor Michael Hirsh•    Takes you within high-level, closed-door conversations of best White apartment advisers and management officers comparable to Alan Greenspan, Robert Rubin, Paul O’Neill, and others•    Illuminates key figures and energetic interpersonal clashes, together with the clash among Larry Summers and Nobel Prize-winning economist Joe Stiglitz •    deals an important insights on why President Obama took see you later to paintings at the economy—and why he is probably not going some distance enough•    Catalogs the missteps of 3 a long time of economic, regulatory, and fiscal recklessness, together with the dismantling of the Glass-Steagall Act, the S&L debacle, Enron, and the subprime loan meltdownAs we fight to emerge from the monetary main issue, something turns out sure: Wall Street’s persevered dominance of the worldwide financial system. Propelled into the lead by way of a new release of Washington policy-makers, Wall highway will proceed to stick prior to them.

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The message was always the same: no need for oversight. They were big boys. Their members were large institutional entities capable of taking care of themselves. Even as she was being slowly squashed in the vise between Treasury and the Fed, to little notice the derivatives scourge continued outside the Beltway. In the fall of 1998, as the Asian crisis was abating, Long-Term Capital Management (LTCM) collapsed under the weight of trillions of dollars in derivatives bets, and the Fed and Treasury had to bully New York bankers into liquidating its positions.

Then she joined Enron’s board. Born was especially worried about the scandals that began to crop up with greater frequency, like the first humid wisps of wind before a storm. Two years before Born became chair of the CFTC, Bankers Trust had nearly blown up two of its biggest clients, Procter and Gamble and Gibson Greeting Cards, by selling them complex derivatives products and, the evidence showed, falsely valuing them. P&G later acknowledged it didn’t understand what it was buying at all. There was the Sumitomo copper scam, when the CFTC enforcement division found that the firm’s chief trader, Yasuo Hamanaka, had been using over-the-counter derivatives contracts in copper to disguise loans, primarily from JP Morgan and Merrill Lynch, which were being used to finance enormous speculation.

It was the heart of America’s strength, and it was thanks in good part to the rollicking open markets on Wall Street. But somewhere along the line, toward the end of this era—as the zeitgeist hit its peak and government regulators backed off completely—Wall Street became the master of Main Street rather than its handmaiden. Wall Street turned ordinary CEOs into stock watchers worried mainly about the performance of their options, and tied corporate time horizons to the upticks and downticks of the stock market.

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