12/23/2013
Business economists Calomiris and Haber (professors at Columbia Business School and Stanford University, respectively) explain how imperfectly politics and commercial banks intersect, and the consequences for the rest of us. Focusing on chronic instability in credit policies, they undertake a detailed comparative historical survey of five nations—England, the United States, Canada, Mexico, and Brazil. Instead of pointing the finger at "‘Wall Street fat cats'" or railing at political realities, they show how and why complex human interests inhibit achieving sound credit systems. Calomiris (U.S. Bank Deregulation in Historical Perspective) and Haber (The Politics of Property Rights) include a close look at the U.S. regulatory failure in the 2007–2009 subprime mortgage crisis. The goal of stable and abundant credit is elusive, the authors wisely conclude, since those who control policy fiercely guard their powers, the media rarely helps voters disentangle complex financial arguments, and elected politicians must cater to bankers, shareholders, depositors, debtors, and taxpayers. Their analysis suggests that autocracies do better with policy than democracies: Meiji-era Japan, Bismarck's Germany, Pinochet's Chile, and today's China, for example. This learned inquiry deserves ample attention from scholars, regulators, and bankers themselves. (Mar.)
This is a beautifully-written book. Calomiris and Haber are always thoughtful, always clear, and they have an eye for the telling metaphor and the thought provoking fact. More importantly, the book reflects the authors' mastery of a vast amount of material on the history of banking. . . . Fragile by Design is a must-read for economic historians, a book to be put on the shelf with . . . similar classics.—-Hugh Rockoff, EH.Net
[I]f you want a methodology for drawing conclusions about the genesis of crises and an explanation for the differing experiences among countries, Fragile by the Design is the winner hands-down.—-Vern McKinley, Cato Journal
Charles Calomiris and Stephen Haber's Fragile by Design is a magnificent study of the economics and politics of banking.—-Mervyn King, Bloomberg Businessweek
Hands down the best single book for understanding the historical journey that laid the groundwork for the financial crisis.—-Jeffrey Lacker, Bloomberg Businessweek
Fragile by Design is a call to action for people to seize the moment to resist crony capitalism.—-Jay Weiser, Weekly Standard
One cannot help but admire Calomiris and Haber's ambition to write one of the most accessible and sophisticated books on the linkage between political institutions and national financial systems.—-Caner Bakir, Public Administration
By any yardstick, Fragile by Design is a remarkable achievement and an important contribution to our understanding of the roots of the banking crises.—-Grant Bishop & Anita Anand, Banking & Finance Law Review
"A seminal political economy analysis of why banking varies so much across countries, with such profound consequences for economic development and social welfare. Not just fascinating and original, but also right."—James Robinson, author of Why Nations Fail
"A monumental intellectual and scholarly achievement that will shape thinking on finance and politics for decades to come. A book for the ages, whose insights are delivered in a lively, punchy, and nontechnical narrative."—Ross Levine, University of California, Berkeley
"A major contribution to our understanding of banking, showing why nations need banks, why banks need the state, and how the quality of banking depends on how the 'Game of Bank Bargains' is played between politicians, bankers, and a penumbra of key protagonists."—Charles Goodhart, London School of Economics and Political Science
"What explains the dramatic variation across countries in the extent, structure, regulation, and fragility of banking? Calomiris and Haber provide a tour de force resolution of the question. Their answer: politics. Fragile by Design's synthesis is shockingly original and convincing."—Darrell Duffie, Stanford University
"A remarkably detailed account of the sources of banking and financial failure under different institutional rules. A masterful achievement and a must-read for banking scholars, analysts, and regulators."—Allan Meltzer, author of A History of the Federal Reserve
"Fragile by Design bristles with insights about how conflicting private interests, intermediated through political institutions, have sometimes produced banking and social insurance arrangements that make financial crises much more likely than they should be."—Thomas Sargent, Nobel Laureate in Economics
"Why do America's banks go bust so often? Fragile by Design draws back the veil that hides the murky world where politics and big money meet, and exposes the surprising truth—that the banks were built to fail. Read, learn, and keep your cash close at hand!"—Ian Morris, author of Why the West Rules—for Now
"Fragile by Design explains why the U.S. banking crisis of 2007–2009 is no aberration, but only the latest episode of a populist bargain gone awry. This is a powerful entry in the debate on how to fix the postcrisis world."—Raghuram Rajan, author of Fault Lines
