Business Insight Zone

A collection of the best things I’ve read (linked in bold type), plus a few things I’ve written (linked in plain type), about the subprime collapse, the credit crunch, and the ongoing woes in the worldwide market. Expect frequent updates — and feel free to suggest more good sources.

Special distinction:

• Portfolio: The End, by Michael Lewis — See more in my rave about it.
• Salon: The year of the financial journalist, by Andrew Leonard — Short, sweet, and either prepares you to read or saves you from reading three other (much longer) pieces. Love this summary: “Taken in toto, the amazing thing about Nocera, McLean, [and] Lewis and Einhorn’s pieces is that no matter what part of the financial system you investigate, the more you know, the more incredulous you become at the awesome spectacle of how incompetently grown-ups in the 21st century operate.”

Useful overviews:

• Bizmology: my Hoover’s colleague Patrice Sarath takes a couple of big-name writers to the woodshed with The subprime mortgage crisis — what Henry Blodget and Adam Gopnik get wrong.
• TIME Magazine: How Financial Madness Overtook Wall Street, By Andy Serwer and Allan Sloan — A lucid, biting, and frequently funny account of how the financial markets got into the mess they’re in today. You’d be hard-pressed to find a better single source for putting current economic events into perspective.
• NPR & This American Life: The Giant Pool of Money — Explains many of the elaborate financial interconnections that have helped cause rolling waves of turmoil in the world economiy.
• Freakonomics blog at the New York Times: Diamond and Kashyap on the Recent Financial Upheavals — Clear explanations of recent events from two financial economists.
• Tyler Cowen in the New York Times: Three Trends and a Train Wreck — In this short article, economist Cowen explains the interplay of several factors including greater wealth worldwide, greater risk-taking, loose U.S. monetary policy (and thereby “misplaced optimism), and “weak governance and oversight.” In my opinion, Cowen spreads the blame around nicely; this calamity was not the product of a few malefactors of great wealth. A key quote: “Most people, including informed insiders, simply did not understand the systematic risk that financial institutions were accepting.” Cowen seems to echo Nassim Taleb when he cites the late Fischer Black, the economist who warned that “we are not as shielded from a sudden dose of bad luck as we might like to think.”

The Bailout:

• Joe Nocera in the New York Times: The Reckoning – As Credit Crisis Spiraled, Alarm Led to Action — An extremely detailed, blow-by-blow account of the swirl of events that led Henry Paulson and Ben Bernanke to put their “break the glass” rescue plan in motion. A key quote: “This is what a credit crisis looks like. It’s not like a stock market crisis, where the scary plunge of stocks is obvious to all. The credit crisis has played out in places most people can’t see.”

An economist’s perspective:

• Paul Krugman’s depression economics — In this interview, Andrew Leonard of Slate elicits clear, pointed answers from the New York Times columnist and current Nobelist, who thinks that the current economic downturn is going to get “Awful” — to the tune of double-digit unemployment.

Historical perspectives:

• Historical perspective can lessen the sting of the economic crisis.
• 1907 redux?

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