Former Federal Reserve chair Greenspan recently said that the risk management paradigm is broken; thus our understanding of financial regulation no longer makes sense. More generally, the current financial crisis obliges us to rethink the relationships among "financial markets" and "governments." In Out of Crisis financial analyst David Westbrook illuminates the intellectual, business, and policy errors that have led us into the present morass. Through a vivid legal and political analysis he shows how the ideologies of the right and left have distorted financial thinking and policy. Learning from these errors, the book sketches the emergence of a new understanding of risk management and bureaucratic regulation. Out of Crisis begins the tasks of rethinking the structures that constitute financial markets and exploring how such structures may be strengthened. Taking responsibility for the markets we build to do so much of our society's work, we may yet become mature capitalists.
Table of Contents
An Introduction to the Argument PART ONE: ON OUR SITUATION Chapter 1 The Suddenly Obvious and the Already Decided Chapter 2 Melodramatic Narratives Chapter 3 Blue Water: the Allure of Modern Finance Chapter 4 Tragedy and Law PART TWO: ON RETHINKING Chapter 5 Policy Thought, Regulation, Innovation Chapter 6 Constructing Healthy Markets Chapter 7 Metaphors for Thinking Socially About Capitalism PART THREE: ON POLICY Chapter 8 Restoring Confidence (Cleaning Up After a Crash) Chapter 9 Confronting Systemic Risk Chapter 10 The Old Questions, the Old Answers Conclusion: Fears and Other Possibilities
“The recent crisis involved an extraordinary sequence of financial market failures. Too many economists had assumed that that could never happen, partly because they had not appreciated the wider social, legal, and institutional context which normally enables such markets to operate. In this beautifully written and gripping book, David Westbrook employs wide-ranging social science skills to make us aware of this wider context, and thereby to see markets, and their occasional failures, in a new light. I found it fascinating, original and illuminating.”
—Charles Goodhart is an expert in money and banking, with a long career in the Bank of England, on the UK Monetary Policy Committee, and at the London School of Economics and Political Science
“Professor Westbrook’s fascinating new book is not just an exegesis of the recent financial crisis—it is a compelling and entertaining diatribe against some of the sacred cows of finance, among them the notions that markets are presumed efficient, corporations can self-regulate, sophistication matters, risk management reduces risk, and securities regulation makes markets transparent. Westbrook takes all of these ideas out back behind their once-sturdy intellectual shed and pumps them full of lead. He then provides a regulatory roadmap that will be an important part of the debate about the future of market capitalism.”
—Frank Partnoy, Professor of Law at the University of San Diego and author of Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
“Out of Crisis: Rethinking our Financial Markets provides clear elucidation on the shaky foundations upon which our financial system was built. … Westbrook points to the need for a rethink of finance and suggests in this respect a better interdisciplinary dialogue between law and finance.”