Casino Capitalism: How the Financial Crisis Came About and What Needs to be Done Now

by Hans-Werner Sinn

Overview

In Casino Capitalism Hans-Werner Sinn examines the causes of the banking crisis, points out the flaws in the economic rescue packages, and presents a master plan for the reform of financial markets. Sinn argues that the crisis came about because limited liability induced both Wall Street and Main Street to gamble with real estate properties. He meticulously describes the process of lending to American homeowners and criticizes both the process of securitizing and selling mortgage claims to the world, as well as the poor job rating agencies did in providing transparency. He argues that the American Dream has ended because the world now realizes that this dream was built on loans that are never likely to be repaid.

Sinn also asserts that the banking crisis has not yet been resolved, because the necessary write-offs of toxic assets have largely been swept under the carpet. Comparing actual worldwide write-offs with those estimated by the IMF estimates, he concludes that substantial parts, if not most, of the true losses have yet to be revealed and that the banking systems of many countries are on the brink of insolvency.

In view of this, Sinn directs sharp criticism at the various economic rescue packages, arguing that the plans assume that banks have a liquidity problem while, in fact, they suffer from a solvency crisis. Sinn points out that the conflict between the goals of rescuing banks in the short term and inducing more prudent behaviour in the long term requires the government to help the banks, but not their shareholders, by becoming a temporary co-owner. In addition, he calls for higher equity requirements, a worldwide return to more cautious accounting methods, a ban on extremely speculative short selling, and strict regulations on conduits, hedge funds and credit default swaps.

This authoritative account provides an invaluable overview for academics, students, policymakers, politicians, and all those with an interest in the unprecedented 2008 banking crisis.

Product Details

ISBN-13:	9780199659883
Publisher:	Oxford University Press
Publication date:	10/12/2012
Edition description:	Reprint
Pages:	402
Product dimensions:	9.10(w) x 6.00(h) x 0.90(d)

About the Author

Hans-Werner Sinn is Chair of Economics and Public Finance at the University of Munich and President of the combined Institute for Economic Research and Center for Economic Studies (CES-ifo). He has published numerous scholarly journals and books but is also a leading commentator on contemporary economic affairs in Germany and has published a number of best selling books.

Table of Contents

1. The world in crisis2. Life on credit3. Bank failures4. Why Wall Street became a gambling casino5. Main Street also gambled6. Hot potatoes7. Policy failure8. The extent of the damage9. Rescue attempts10. Will the West retain its stability? 11. Ways to a better banking system

Editorial Reviews

"Sinn's analysis is the most readable and best (popular science) account of the financial crisis that has yet appeared."—Sebastian Dullien, Financial Times

From the Publisher