I think that in order to understand the financial markets thoroughly enough to see how the rules and regulations affect our businesses today, we need to look at both sides of the argument. That’s why I read the book 13 Bankers.
13 Bankers addresses the financial crisis that the U.S. is facing and does a nice job in providing a detailed history of the financial markets in America. Throughout the book, the authors, Simon Johnson and James Kwak share their insights while openly displaying their opposition to the efficient-market hypothesis. (Letting the free-market correct itself) It’s easy to see their stance from the get-go, which is why I read this book (to expand my view).
I am a believer in the free market and feel that our economy benefits when the government keeps out (to put it bluntly). It’s true that some regulation is necessary, but a true free market functions in a way to weed out the weak and reward the strong – not provide bailouts for the weak and charge the strong.
For years the banking industry has cried “deregulation, deregulation” and many have opposed the strict rules and regulations placed on banks. Those in the ‘free-market’ camp state that the rational person will not do business with a company unless it’s in their best interest, which will force banks to do what is best for the consumer. Unfortunately, many banks and investment firms have devised ways to create higher profits, which don’t always benefit the consumer. The general public can become so enthralled with the potential earnings associated with complex investment products and not even understand what they’re getting into. Does that mean we need more regulation? I think the answer is unclear.
Regardless of the strictness of regulation that is placed on banks, I think that the underlying problem stems from decision makers of the banks and investment companies. 13 Bankers does a great job showing how financial incentives on Wall Street evolved since the 1960’s and how the greed of some have affected the investments of many.
If you’re interested in a detailed account of the financial industry, I recommend 13 Bankers. Some parts can be pretty technical, but if you’re a business student wanting a concise history of banks and investments, it’s a good read.