September 22, 2014
Reviewed by Vern McKinley
Charles Calomiris and Stephen Haber have taken on a big task in their book, Fragile by Design: The Political Origins of Banking Crises and Scarce Credit. Their goal is to explain the double hit that economies and financial systems suffer when they experience a banking crisis and then the tightening of credit that often follows. In order to keep the final product manageable, and thus avoid having a 2,000 page book, the authors limit their case studies to the United Kingdom, United States, Canada, Mexico, and Brazil. Their time frame extends back to the 17th century. At its core, their argument is that financial crises are not random; they flow from the “Game of Bank Bargains”—that is, political deals that dictate everything in a banking system from the issuance of licenses to the means for distribution of credit.
» See full article in the Cato Journal
September 16, 2014
Guests: Larry Kudlow, CNBC. Phil Izzo, WSJ. Stephen Haber, Hoover. Andrew McCarthy, NRO.
In the wake of the 2008–2009 financial crisis a pervasive view began to emerge of banking as an inherently unstable occupation that must be tightly regulated and monitored by government agencies. Charles Calomiris and co-author Stephen Haber overturn this notion by presenting an inconvenient truth: not all countries suffer systemic banking crises.
Book Forum at the Cato Institute
Reviewed by Hugh Rockoff
Charles W. Calomiris and Stephen H. Haber, two of America’s leading financial historians, have written an ambitious and in my view a largely successful book to provide an explanation for the political economy of banking through history and across nations. The central question is why some banking systems provide both abundant credit and financial stability over long periods while others, including unfortunately the financial system of the United States, fail to do so.
» See full article on EH.net
Columbia Business School
Ideas At Work
August 21, 2014
This is the first book that takes an in-depth look at the connection between politics and banking crises. What led you to the topic?
Stephen Haber at Stanford and I spent the better part of the last 30 years working separately on issues of banking system risk. And that work kept revealing the impact of political influences on banking systems.
If you talk to anyone who’s ever run a bank, or any journalist who covers banking in depth, they’ll tell you that politics is hugely important. Yet in a lot of academic analyses, politics is little more than a footnote. We wanted to know — especially in light of the most recent crisis, but also of the last 35 years, in which over a hundred countries — including countries as different as England, Russia, Argentina, and Iceland — have experienced banking crises, why banking systems are sometimes dysfunctional and sometimes successful, and why some countries manage to make transitions from dysfunctional systems to functional ones.
And we wondered if politics was critical to understanding that. And so we began to examine various countries’ banking histories in light of their political histories: where a country’s constitution came from, how it was settled, what system of government it has. We saw that these factors might be the main drivers of banking function or dysfunction, both in terms of instability and scarce credit. Having researched this subject for three decades, we knew that this was more than plausible. It was the story.
Read the entire interview in Ideas At Work
Opinion: Shaking Down Bank of America
Haber on the Department of Justice’s $16.65 billion settlement with the bank for alleged mortgage fraud. Photo credit: Getty Images.
The Federalist Society
August 04, 2014
Reviewed by Andrew Olmem
For most people, the Financial Crisis of 2008 was an unexpected, unforgettable, and harrowing event. For Charles Calomiris of Columbia University and Stephen Haber of Stanford University, however, the crisis was just the latest in a long series of banking crises throughout American history. By their count, the United States has endured 12 banking crises since 1840. In their view, the more surprising and consequential number is the number of banking crises experienced by Canada during the same time period: zero.
In Fragile by Design, Calomiris and Haber set out to explain why some countries, like the United States, appear prone to banking crises, while other countries, like Canada, have been crisis free. Their conclusion is that it all comes down to politics. While this may appear to be an easy answer, their account of how politics shapes banking systems is a must-read for anyone interested in understanding the complex, political foundations of banking.
» See full article in The Federalist Society.
August 7, 2014
Fragile By Design has been selected for the long list for the 2014 Financial Times and McKinsey Business Book of the Year Award. The Business Book of the Year Award – recognised as the leading business book award – highlights ground-breaking books which explore important business and economic issues. The long list was selected from over three hundred titles entered for the 2014 prize.
Last year’s winner of the book award was The Everything Store: Jeff Bezos and the Age of Amazon by Brad Stone. The World is Flat by Thomas Friedman won in 2005.
A shortlist for the Business Book of the Year Award will be announced in New York on September 24th, and the winner will be announced on November 11, 2014.
Calomiris discusses the banking crises, government intervention, and the free market with Tom Woods.
Why are banking systems unstable in so many countries–but not in others? The United States has had twelve systemic banking crises since 1840, while Canada has had none. The banking systems of Mexico and Brazil have not only been crisis prone but have provided miniscule amounts of credit to business enterprises and households. Analyzing the political and banking history of the United Kingdom, the United States, Canada, Mexico, and Brazil through several centuries, Fragile by Design demonstrates that chronic banking crises and scarce credit are not accidents due to unforeseen circumstances.
View the entire interview on the Larry Parks Show