Cover image for Financial Stability, + Website

Financial Stability, + Website

Author R. Christopher Whalen , Frederick L. Feldkamp
Release Date: 2014/09/01
ISBN: 9781118935798
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Book Description

Applying the Lessons of History to Understanding Fraud Today and Tomorrow

Financial Stability provides a roadmap by which the world can anticipate and avoid future financial disruptions. This unique discussion of past and present financial events offers new insights that explain economic, political, and legal antecedents of financial crises in Western markets. With a detailed discussion of the history of finance, this book shows modern investors and finance professionals how to learn from past successes and failures to gauge future market threats.

Readers will gain new insight into the antecedents of todays financial markets and the political economy that surrounds them. Armed with this knowledge, they will be able to craft a strategy that steers away from financial disorder and toward maximum stability. Coverage includes discussion of capital, forecasting, and political reaction, and past, present, and future applications within all realms of business. The companion website offers additional data and research, providing a complete resource for those seeking a better understanding of the risk at hand.

As the world struggles to emerge from the latest financial crisis, professionals in finance, the law and other disciplines, and the people they advise, are searching for understanding to avoid future crises. Financial Stability argues that the best lessons are learned from our own mistakes, and that the ability to look ahead depends upon our willingness to look back. Readers will:

  • Review the historical laws, practices, and outcomes that shaped the modern day financial markets of the great western economies
  • Understand the theory of financial stability, the roles of law and transparency, and the importance of action to punish fraud in order to prevent future contagion
  • Work through the theoretical proofs in terms of math, law, accounting, economics, philosophy, and international trade
  • Build a strategy for the future with consideration toward needs, sources, balance, and learning from past mistakes

Everywhere around the globe, at all points in history, financial crises have always been rooted in the confluence of politics, finance, and law. Financial Stability puts the latest global financial crisis in perspective, highlighting the lessons we have already learned, and those we need to internalize today.

Table of Contents

  1. Preface
  2. Introduction
  3. PART ONE A Flight through Financial Market History—Freedom and Fraud
    1. CHAPTER 1 The First Few Millennia
    2. CHAPTER 2 The Bank of England and the Scottish Enlightenment
    3. CHAPTER 3 U.S. Banking from the Colonial Period to 1865
    4. CHAPTER 4 Bagehot’s Dictum (a.k.a. the Greenspan Put)
      1. Note
    5. CHAPTER 5 U.S. Financial Markets from 1865 to the Great Depression
    6. CHAPTER 6 Depression, War, and the Aftermath—Reflecting on Finance from 1929 to 1973
    7. CHAPTER 7 Early Deregulation: The Transactions That Replaced Depression-Era Thrifts
    8. CHAPTER 8 Riskless Arbitrage—Stand-Alone Collateralized Mortgage Obligations (CMOs)
      1. Economic Experiments: From Vietnam to the S&L Crisis
      2. Penn Square Bank and the Participation Problem
      3. The Repurchase Game
      4. Unconsolidated Finance Affiliates of Manufacturers and Homebuilders
      5. The Rise of CMO Bonds Issued by Homebuilders
      6. Notes
    9. CHAPTER 9 Paradise Gained, Lost, Regained, and Destroyed (1992 to 2008)
      1. Equilibrium Achieved—Just in Time
      2. 1998: When the SEC Destroyed a Wondrous Machine
      3. The Build-Up to Disaster (2001 to 2007)
      4. Enlightenment Ignored—Result: Armageddon (2007 to 2009)
      5. Twenty Events That Led to Bankruptcy
      6. Notes
    10. CHAPTER 10 Resurrection, Recovery, and Reform (2008 to 2014)
      1. Bernanke Speech in DC (Chart 9.1, Event 21)
      2. Euro Debt Crisis (Chart 9.1, Event 23)
      3. GOP Wins House (Chart 9.1, Event 24)
      4. New Stimulus Agreement (Chart 9.1, Event 25)
      5. Debt Ceiling Crisis (Chart 9.1, Event 26)
      6. Death of Osama bin Laden (Chart 9.1, Event 27)
      7. Greek Budget Restraints (Chart 9.1, Event 28)
      8. Tea Party Uprising (Chart 9.1, Event 29)
      9. Bernanke Speech at Jackson Hole (Chart 9.1, Event 32)
      10. Fed Acts Despite GOP Threats (Chart 9.1, Event 33)
      11. Tea Party Extortion (Chart 9.1, Event 34)
    11. CHAPTER 11 Different Circumstances Require Different Solutions
  4. PART TWO The Theory of Financial Stability
    1. CHAPTER 12 Statement: Rule of Law + Freedom + Transparency → Equilibrium
    2. CHAPTER 13 Saying versus Doing
  5. PART THREE Proofs of the Theory of Financial Stability
    1. CHAPTER 14 Mathematics: (1 + i )x > (E = mc 2)
      1. Note
    2. CHAPTER 15 Law: Incomplete Sale ≡ Secured Borrowing
    3. CHAPTER 16 Economics: Savings ≡ Investment
    4. CHAPTER 17 Accounting: Assets ≡ Liabilities + Capital
    5. CHAPTER 18 International Trade: Current Account Deficit ≡ Capital Investment – Domestic Savings
      1. Note
    6. CHAPTER 19 Philosophy: Benevolence > Self Interest > Fraud
  6. PART FOUR The Future
    1. CHAPTER 20 Achieving Wisdom While Avoiding the Mistakes of Experience
    2. CHAPTER 21 Capital Needs
    3. CHAPTER 22 Sources of Capital
    4. CHAPTER 23 Managing the Water Balloon
    5. CHAPTER 24 Balancing the Bubbles
  7. Epilogue Truth and Consequences
  8. Appendix Six Legal Isolation Requirements
    1. True Sale Opinion and Non-consolidation Opinion
    2. Qualifications, Limitations, or Disclaimers Included In an Attorney’s Opinion
    3. Notes
  9. References
  10. About the Companion Website
  11. About the Authors
    1. Frederick L. Feldkamp
    2. Richard Christopher Whalen
  12. Index
  13. End User License Agreement
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