Amazon link – Firefighting: The Financial Crisis and Its Lessons by Ben S. Bernanke, Timothy F. Geithner, Henry M. Paulson Jr.
For a subject as dramatic as a financial crisis, not to mention the 2008-09 crisis, it is safe to say that the story writes itself. The gradual build-up of mania, the early flashpoints of strain, the contagion and the subsequent crash. With several books, movies and theses already being dedicated to it, this book’s claim to recognition is that it is straight from the policymakers responsible for fixing the system during and after the crisis.
The purpose of the book is to commemorate the tenth anniversary of the financial crisis by noting its key events, humbly acknowledging that the authors underestimated the build-up of the crisis, justifying their actions, weighing the public backlash and finally reflecting on the system’s preparedness of a similar crisis in the future. With this purpose, the outcome is a short book of about 130 pages and six chapters in all. The first four chapters sequentially chronicle the roots of the crisis, how it started, spread and intensified. The last two chapters cover the policy response to the crisis and the lessons for the future. At the end of the book are some seventy pages of charts.
The book is a collective platform for the authors to appreciate the power of the “visible hand of the government” in resolving financial crises and lament the downgrade of policymakers’ financial crisis fighting powers due to change in government policy. The chart section itself is richly informative with creative visualizations. Some of the charts that I found very useful were those on the Libor-OIS spread overlaid with facts on policy response, the government’s outstanding commitments to AIG and the income or cost (to taxpayer) of financial stability programs.
The language is fairly simple to read and technical jargon is minimal. The tone is engaging with extensive use of metaphors and analogies from movies and nature over and above the keynote analogy of firefighting. It is mercifully light on details and does not try to be dramatic (like the authors’ individual memoirs on the subject) by quoting stock market swings and flurried phone calls at every juncture of the crisis. Nor does it bore the reader by going into a detailed chronicling of the repeated re-negotiations of the AIG and Citi bailouts. Factual and numeric details are relegated to the chart section at the end.
Some analogies used in this book appear to be borrowed from Bernanke’s memoir. For instance, the one likening the rescue of errant financial institutions to dousing your neighbour’s fire before admonishing him from smoking in bed. Sometimes, references to popular statements made during the crisis, such as Paulson’s “Bazooka” comment or Senator Barney Frank’s “Free Market Day” comment can make the narrative seem unoriginal to seasoned readers of the subject. But in its entirety the book offers a broad initiation to someone just starting to read about the crisis while the charts add valuable detail to those already aware of the broad facts.
Macrologue 