200 Years of American Financial Panics: Crashes, Recessions, Depressions, and the Technology that Will Change It All

by Thomas P. Vartanian

Overview

From 1819 to COVID-19, 200 Years of American Financial Panics offers a comprehensive historical account of financial panics in America. Through a meticulous dissection of historical events and the benefit of his experience handling many of the country’s largest bank failures, Thomas P. Vartanian reveals why so many more devastating financial crises have occurred in America than nearly every other country in the world. Vartanian provides extensive evidence of how the collision of policy-driven government actions and profit-oriented business performance have disrupted market equilibrium and made the U.S. system of financial oversight less effective and more susceptible to missing the signs of future financial crises, including policies that: ·imposed tariffs and chartered dozens of poorly regulated, uncapitalized state banks that facilitated panics in the 19th century; ·created ambivalence over whether gold, silver or paper money should be the preeminent form of payment, creating the perfect conditions for the depression of 1893; ·kept interest rates low to assist the central banks in England, Germany and France, allowing an overheated U.S. stock market to shift into overdrive and crash in 1929; ·planted the seeds of the S&L crisis more than twenty years before when Congress imposed artificial limits on deposit interest rates and the states capped mortgage interest rates to increase homeownership;
• pressured banks in the 1990’s to increase mortgage lending to increase home ownership while the Fed engaged in loose monetary policies, adding fuel to the greatest economic crisis since the Great Depression. 200 Years of American Financial Panics dissects financial crises in a way not attempted before, concluding that the pyramid of governmental oversight intended to foster economic safety and stability has been turned on its head to its detriment. Vartanian provides readers with a unique list of practical solutions. Most importantly, his analysis of financial technology, from artificial intelligence and Big Data to cryptocurrencies and quantum computing, forecasts how financial markets and government regulation will change. 200 Years of American Financial Panics is a must read for anyone that wants to understand their money, financial markets, and how they are going to change in the future.

Product Details

ISBN-13:	9781633886704
Publisher:	Prometheus Books
Publication date:	05/15/2021
Pages:	460
Sales rank:	1,112,400
Product dimensions:	6.20(w) x 9.10(h) x 1.80(d)

About the Author

Thomas P. Vartanian has been involved in US financial services since 1976. Throughout his career, he has represented parties in 30 of the 50 largest bank and S&L failures in the country. He served in the Reagan administration as General Counsel of the Federal Home Loan Bank Board and the Federal Savings and Loan Insurance Corporation during the S&L Crisis, and before that as Special Assistant to the chief counsel at the Office of the Comptroller of the Currency in the Carter administration. He was the Chair of the American Bar Association’s Cyberspace Law Committee between 1998 and 2002. Between 1983 and 2018, Vartanian chaired the financial institution’s practices at the international law firms of Dechert LLP and Fried Frank LLP.  After retiring from the practice of law, he became the Executive Director of the Program on Financial Regulation and Technology at George Mason University’s Scalia Law School, where he was also a Professor of Law. He has been an adjunct professor teaching banking and financial technology law at Georgetown, George Washington, and Boston University law schools and has guest-lectured at Harvard Law School. His articles have appeared in numerous publications around the world, including the Wall Street Journal, The Hill, The Washington Times, and American Banker.

Table of Contents

Preface ix

Introduction xv

Part 1 The Recipe For Panic Stew

1 Handle with Care: Fragile Financial Ecosystem 3

2 How the System Works-Until It Doesn't 37

Part 2 How the Government Creates Financial Crises

3 The S&L Reckoning 65

Part 3 The Pre-Regulation Era: A Century Of Panic

4 Boom, Bust, Panic, and Repeat 97

5 The Era of Federal Regulation 119

6 Troublous Times 131

Part 4 The Regulatory Era: Even Larger Panics

7 Financial Armageddon: 1929 145

8 Down Come the Banks: The 1980s 163

9 No One Washes a Rented Car: 2008 171

10 Financial Pandemic: 2020 205

Part 5 The Cure for the Common Crisis

11 Building a Better Mousetrap 243

12 Machines to the Rescue 275

13 Attack of the Algorithms 305

14 Days of Future Panics 327

15 Putting Mrs. O'Leary's Cow in Context 351

Epilogue 357

Acknowledgments 359

Notes 361

Index 415

Editorial Reviews

200 Years of American Financial Panics is a definitive history of financial crises in America and how government oversight prevents and creates them. Vartanian uses his experienced legal and business eye to unravel the conventional wisdom and identify the enormous positive and negative impacts that technology will likely have on the U.S. economy in the future.” –William M. Isaac, Co-Chairman of the Isaac-Milstein Group, former Chairman of the FDIC and Fifth Third Bancorp, and the author of Senseless Panic: How Washington Failed America

“Vartanian brings it all together: historical perspective, fascinating personal experience from the center of events, and sensible proposals for improvement of regulation. Citizens and decision makers have the guide they need right here.” –J. Christopher Flowers, CEO of J.C. Flowers & Co.

“In 200 Years of American Financial Panics, Vartanian uses his years as a preeminent federal banking regulator to give us a riveting and detailed account of the crashes, recessions and depressions that have rocked our country's fragile financial ecosystem, and why if nothing changes we should expect more.  In an account both lively and analytically sharp, we see a financial sector that could be made more resilient through a real-time system of technology driven oversight. A gripping read for those many Americans wondering why they have experienced the pain of two deep economic crises in but one lifetime." –Sarah Bloom Raskin, Former Deputy Secretary of the Treasury and Former Governor of the Federal Reserve Board

“200 Years of American Financial Panics is an incredibly readable and understandable analysis of financial regulation and its relationship to American financial crises. It learns from the past to point a smarter way forward for financial regulation” –Greg Baer, President and CEO of Bank Policy Institute, former Managing Director and Head of Regulatory Policy at JPMorgan Chase, and former Assistant Secretary for Financial Institutions at the U.S. Department of the Treasury

“Vartanian uses his unparalleled experience as a regulator, lawyer, educator and technology futurist to decipher the past, explain the present and predict our financial future. He provides critical insight on the role technology can play in identifying and averting potential future financial panics.” –Craig Phillips, Former Counselor to the Secretary, U.S. Department of the Treasury  

“200 Years of American Financial Panics is a fascinating, well-informed critique by someone who has seen financial regulation in the USA from every angle. Vartanian convincingly demonstrates that the faults lie not solely with greedy bankers, but with a whole range of executive and political decisions. Above all, he rightly focuses on the impact of technology, such as the use of Big Data, AI, and quantum computing, all of which should be harnessed to facilitate a financial sector which not only benefits its citizens but protects them as well. This is a timely and thoroughly researched call to action”. –Dr Oonagh McDonald CBE, former UK Member of Parliament and former Board Member of the UK Financial Services Authority

“200 Years of American Financial Panics is a superb, thought-providing tour through U.S. financial history by one of the nation’s foremost financial regulatory experts. Along the way, Vartanian shares the lessons learned during his more than four decades as a practicing lawyer and as a former financial regulator during some of the most tumultuous times in U.S. history. Easily accessible to general readers, Vartanian’s account also will engage experienced practitioners and policymakers with its erudition and valuable insights on how the U.S. can avoid future financial crises.”     –Andrew Olmem, partner at Mayer Brown LLP, former Deputy Director of the White House National Economic Council, and former Republican Chief Counsel at the U.S. Senate Committee on Banking, Housing, and Urban Affairs  

“Drawing upon his years in government and private practice in the financial industry, Vartanian has developed an intimate, real world knowledge of financial crises from multiple perspectives. In 200 Years of American Financial Panics, he presents us with an important and timely review of common elements that underlie these disruptive events. More importantly he provides a view into future threats for financial dislocation coming from crypto currencies, A.I. and cyber events. Chief among the themes throughout the book is the role of government in its attempt to resolve these crises, implementing controls that provide for unintended consequences that form the basis of future crises.” –John Buran, CEO Flushing Financial Corp. and Chairman of the Board, Federal Home Loan Bank of NY  

“200 Years of American Financial Panics is the antidote for Twitter-sized explanations for the complexities, and causes, of the financial crises experienced by the US during the last 200 years. Vartanian’s muscular, insightful, and compelling prose is a cross between Norman Mailer and Milton Friedman. Any reader with a passing interest in the financial history of the US will find it easily accessible. As a former bank regulator, attorney and current banker and banking law professor, I strongly recommend this work, especially to those with an interest in the period leading up to and during the S&L crisis.” –Richard Wald, Chairman and CEO of Emigrant Mortgage Company and Emigrant Funding Corp, Chief Regulatory Officer of Emigrant Bank  

“In 200 Years of American Financial Panics, Vartanian revisits U.S. financial history in a clear, concise, and compelling way. He offers a great reminder of the unintended consequences that so often arise from regulatory interventions made to address a few bad actors and inadequate controls. Best of all, he shares enlightened ideas for improving regulatory oversight which is a cause for optimism for those who believe free markets best serve consumers in our society. This book is a must-read for anyone interested in learning how our financial system operates.” – Steve McManus, General Counsel, State Farm Insurance

From the Publisher