Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy »

Barry Ritholtz is CEO and director of equity research at FusionIQ.com, an online quantitative research firm. He regularly appears as an expert on CNBC, Bloomberg, Fox, and PBS, and he is the author of the topranked financial weblog, The Big Picture, hailed by The Wall Street Journal as “what the in-crowd knows.”

"Do you find yourself wondering: How did we get here? How did the United States of America get into such a predicament whereby in one year, 2008, the financial system nearly vaporized, the stock market crashed, real estate tanked, and major corporations were being bailed out. . . .How did our great country, a bastion of capitalism, devolve into a Bailout Nation where the gains were privatized, but the losses were socialized?"

—From the Foreword by Bill Fleckenstein

In Bailout Nation, Barry Ritholtz, author of the popular finance blog www.ritholtz.com/blog/, deftly mixes financial history with an insider's knowledge of modern finance to reveal how we've arrived at one of the worst economic crises ever. Engaging and informative, this book clearly shows how years of trying to control the economy with easy money has finally caught up with the United States and how the government's practice of repeatedly rescuing Wall Street—as well as other industries and organizations—has come back to bite them.

Divided into five compelling parts, this timely guide opens with a brief history of bailouts, detailing their particular patterns and unintended consequences. From here, it quickly moves on to reveal the events, individuals, and institutions that have shaped our current situation. You'll see how various government interventions—in individual companies such as Lockheed during the 1970s, in specific sectors such as banking in the early 1990s, and eventually, entire markets with the rescue of stocks in 2000—opened up a Pandora's Box. You'll also discover how the misguided philosophies of many players, from Fed Chairmen and Presidents to Senators and Treasury Secretaries, promoted the massive meltdown that has engulfed our global economy.

Ritholtz leaves no stone unturned, as he breaks down how the Federal Reserve's interest-rate targeting policies as well as a condition known as moral hazard—the belief that you won't bear the full consequences of your actions—perpetuated the reckless financial risk taking that has pushed us to the brink. Ritholtz also takes some of the biggest Wall Street firms—along with their enablers, the ratings agencies—to task. Page by page, you'll learn how the repeal of certain regulations allowed banks to merge into unruly financial behemoths, while unproven investment vehicles, including collateralized debt obligations (CDOs) and credit default swaps (CDSs), wreaked havoc on both the credit and housing markets.

The United States has abandoned its capitalist roots and become a Bailout Nation. The implications of this are significant and far-reaching. If you intend on navigating today's treacherous terrain, it would be wise to understand how we got here and what you need to get ahead. Scathing, but fair, Bailout Nation puts this financial debacle in perspective—through discussions of past miscues and an exploration of solutions being proposed-and offers a voice of reason during these uncertain economic times. 

Foreword.

Acknowledgments.

Introduction Bailout Nation.

PART I A BRIEF HISTORY OF BAILOUTS.

Chapter 1 A Brief History of Bailouts.

Chapter 2 The Creation of the Federal Reserve, and Its Role in Creating Our Bailout Nation.

Chapter 3 Pre-Bailout Nation (1860–1942).

Chapter 4 Industrial-Era Bailouts (1971–1995).

Intermezzo A Pattern Emerges.

PART II THE MODERN ERA OF BAILOUTS.

Chapter 5 Stock Market Bailouts (1987-1995).

Chapter 6 The Irrational Exuberance Era (1996-1999).

Chapter 7 The Tech Wreck (2000-2003).

Chapter 8 The Backwards, Rate-Driven Economy.

Intermezzo A Brief History of Finance and Credit.

Chapter 9 The Mad Scramble for Yield.

PART III MARKET FAILURE.

Chapter 10 The Machinery of Subprime.

Intermezzo A Memo Found in the Street: Uncle Sam the Enabler.

Chapter 11 Radical Deregulation, Nonfeasance.

Chapter 12 Strange Connections, Unintended Consequences.

Chapter 13 Moral Hazard: Why Bailouts Cause Future Problems.

PART IV BAILOUT NATION.

Chapter 14 2008: Suicide by Democracy.

Chapter 15 The Fall of Bear Stearns.

Chapter 16 Dot-Com Penis Envy.

Chapter 17 Year of the Bailout, Part I: The Notorious AIG.

Chapter 18 The Year of the Bailout, Part II: Too Big to Succeed?

Intermezzo Idiots Fiddle While Rome Burns.

PART V POST-BAILOUT NATION.

Chapter 19 Casting Blame.

Chapter 20 Misplaced Fault.

Chapter 21 The Virtues of Foreclosure.

Chapter 22 Casino Capitalism.

Postscript Advice to a New President.

Notes.

Index.