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Makers and Takers

The Rise of Finance and the Fall of American Business

By Rana Foroohar
15-minute read
Audio available
Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar

Makers and Takers (2016) investigates the role of finance in the 2008 crisis and subsequent recession. From the Great Depression onward, these blinks trace the history of loose regulation and blurred boundaries between commercial and investment banking, while highlighting the role of banks, businesses and politicians in the crisis. They also suggest actions the powerful can take to kickstart reform.

  • Readers curious about the historical background of the 2008 crisis
  • Students of economics and finance
  • Young couples, families and professionals considering their prospects for mortgages and pensions

Rana Foroohar is a global economic analyst at CNN and a business columnist for Time magazine. She is also a frequent commentator for the BBC, NPR and CBS.

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Makers and Takers

The Rise of Finance and the Fall of American Business

By Rana Foroohar
  • Read in 15 minutes
  • Audio & text available
  • Contains 9 key ideas
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Makers and Takers: The Rise of Finance and the Fall of American Business by Rana Foroohar
Synopsis

Makers and Takers (2016) investigates the role of finance in the 2008 crisis and subsequent recession. From the Great Depression onward, these blinks trace the history of loose regulation and blurred boundaries between commercial and investment banking, while highlighting the role of banks, businesses and politicians in the crisis. They also suggest actions the powerful can take to kickstart reform.

Key idea 1 of 9

Like the Great Depression, our own Great Recession was triggered by a flawed financial system.

Americans who experienced the Great Depression of the 1930s probably felt a little déjà vu about the crash of 2008. Debt, credit and economic bubbles were instrumental in both financial crises. Just as in 2008, the Great Depression followed on from mounting debt and consumer credit.

Debt, like credit card use, is a financial product. The more debt is issued, the larger the financial sector grows. When the author was writing Makers and Takers, the financial sector was the same size it had been just prior to the Great Depression – a size it has not reached at any other point in history.

Credit is rampant today in the United States, just as it was in 1920s America. Back then, Americans used credit to gain access to around 75 percent of major household items. Before the Great Depression and our own Great Recession, credit was used to mask the severe income inequality that resulted from declining workers’ wages and the skyrocketing profits made by stock market investors.

Finally, the years leading up to the 1929 financial crash were characterized by a steadily growing economic bubble. After the fall, the bankers weren’t held accountable – sound familiar?

The 1920s bubble emerged after copper prices fell, and banks such as the National City Bank of New York sold stocks in copper mines, telling their oblivious customers that they were a prudent investment. This created the bubble that eventually triggered the 1929 stock market crash. While National City chairman Charles Mitchell was subjected to public shaming in Senate hearings, he returned to Wall Street soon after. In fact, he never spent a day in prison.

The same goes for the bankers responsible for our financial crisis. Richard Fuld, former head of Lehman Brothers, continues to work in the financial sector at Matrix Advisors and Legend Securities.

The similarities between both financial crises might leave you wondering whether we’ve learned anything from history at all. In the next blink, we’ll investigate how the American economy managed to take us back to the 1930s in 2008.

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