May 28 (Bloomberg) — With so many business books spilling from the shelves, we’re often asked for a comprehensive list of recommendations. Here are 50 of our favorite titles published since Jan. 1, 2009.

“Animal Spirits” by George A. Akerlof and Robert J. Shiller (Princeton). The two economists explore how psychology drove us from boom to bust.

“Bailout Nation” by Barry Ritholtz (Wiley). A financial blogger chronicles why the U.S. came to embrace bailouts.

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Source:
Top 50 Business Books, ‘Animal Spirits’ to ‘What the Dog Saw
James Pressley
Bloomberg, May 28 2010
http://www.bloomberg.com/apps/news?pid=20601088&sid=aPJsasCVoVEk

“If you read nothing else about money, read [this}:

There has been no shortage of books to explain our recent recession, but to understand what the hell we all just lived through and how the fallout is going to affect us for a loooong time to come, read Barry Ritholtz’s Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy. Ritholtz is a scarily smart and righteously angry financial insider, and this book, which rips Wall Street a new one, is gripping and completely comprehensible even if you’ve never bought a stock in your life.”

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Source:
New Rules of Personal Finance and Complete Fiscal Sanity
BY JOEL LOVELL, DANIEL RILEY, SARAH GOLDSTEIN, NATE PENN, AND MARK KIRBY GQ, April 2010
http://www.gq.com/how-to/rest-of-your-life/201004/new-rules-personal-finance-article?currentPage=4#ixzz0mRmeKxUk

USA Today: “Best books to make sense of financial crisis of 2009”
Miami Herald: “Best business books of 2009”
Stock Trader’s Almanac: “Investment Book of the Year”

“Succeeds in laying out all that transpired in easy-to-understand language. If you want to know how we got into this mess and what might still be coming, this is the book for you.”
-Wall Street Journal

“The author writes with the fury of an insider mortified by the behavior of his heretical peers . . . There is much to be said for the book’s irreverence. Mr. Ritholtz has written an important book about a complicated subject, and yet you could still read it at the beach. Here’s hoping that some policy makers in Washington take it with them on vacation this month.”
-New York Times

“Ritholtz makes a valuable new contribution to our understanding of how we arrived at this sorry juncture. He’s smart, sassy and often amusing. If you’re looking for an all-in-one place explanation of what went wrong and why, this is the book for you (or your confused neighbor).”
-Bloomberg

Bailout Nation’s straightforward, compelling account puts the crisis in context, explains why the US government responded so stupidly, offers solutions, and advises how to prevent a repeat. Ritholtz’s indictment of the financial and political establishment is devastatingly accurate.
-Asia Times

“Before the housing and credit bubbles popped, Barry Ritholtz, a lawyer turned blogger and money manager, was one of the voices crying in the wilderness. His caustic (and occasionally profane) blog, The Big Picture, dissected macroeconomic news and relentlessly cut through spin. His book takes a long view of the roots of the economic crisis, tracing the history of a series of ever more expensive taxpayer-funded bailouts of failed industries.”
-Newsweek

“Ritholtz’s book seeks to explain how the United States, once so proud, became “a nanny state for well-paid bankers. Ritholtz may be just the right person to explain the transition to both the disillusioned amateur and the finance junkie. He doesn’t pull his punches or bury the truth in layers of finance-speak, caveats, and disclaimers. Since he began blogging seven years ago, in-the-know readers of his popular blog, The Big Picture, have turned to Ritholtz for his prescient, refreshingly honest commentary on the economy. Anyone interested in understanding the roots of our current crisis should check out the book..”
-Freakonomics

“A comprehensive crisis scrapbook compiled by the money manager behind the popular financial blog the Big Picture in a quippy, no-nonsense voice…”
-New York Magazine

“These are some of the provocative and even dangerous questions that Barry Ritholtz takes on in Bailout Nation…Above all, Bailout Nation is about the socialization of risk and the privatization of profits.
-Forbes

HTTP://WWW.MIAMIHERALD.COM/BUSINESS/STORY/1399600.HTML

I didn’t — couldn’t — read every business book published during the past year, but I was still gob-smacked by the number of books that I did read in 2009, including a few just for fun. (Imagine that!) But among those that I read and reviewed in this space, these titles represent the ones that I thought were exceptional, have lasting value and were worth my time — and yours.
A few things that may have deserved inclusion didn’t make the cut for one reason or another, and some worthy titles that came out in 2009 won’t get reviewed until January. Them’s the breaks. You may have a few choices that aren’t here either. If you’d like to share, I’m always happy to get e-mail from readers. After all, you make this all possible.

Thanks for reading!

(Books listed in chronological order by review. Date of original review follows each title. Full reviews of all books on this list are online at www.richardpachter.com)

Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy. Barry Ritholtz. Wiley. 332 pages. 6/1/09

Economist and investment guru Barry Ritholtz’s blog, The Big Picture, is a mandatory daily stop for many. This honest, unvarnished look at the forces that screwed up the U.S. economy is a worthy candidate for a time capsule so that future financial operators can avoid the same traps that we fell into. Or at least howl when history repeats itself.

http://www.usatoday.com/money/books/2009-12-20-years-best-business-books_N.htm

After the collapse of Lehman Bros. in September 2008, Federal Reserve Chairman Ben Bernanke, then-Treasury secretary Henry Paulson and then-New York Fed president Timothy Geithner stood on the brink of catastrophe. Their decision not to bail out Lehman set off a near panic among investors and lenders worldwide.

In response, the government implemented a $700 billion bailout and has since adopted a series of rescue measures that put U.S. taxpayers on the hook for a potential $14 trillion, author Barry Ritholtz says.

The panic and the U.S. reaction spawned a wave of books. Money Bookshelf editor Gary H. Rawlins picks some of the better ones. The selection includes books that point the finger at Wall Street firms and their CEOs, that blast the government for excessive bailouts, that assail the U.S. economic policy triumvirate for letting the inflation genie out of the bottle, and that explain arcane financial derivatives and how they acted as viral agents spreading the crisis to the global economy.

•Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System — and Themselves by Andrew Sorkin (Viking Adult, $33). Arguably the definitive history of the banking crisis, a blow-by-blow account of how decisions made on Wall Street and in Washington in the past decade led to the crash of the global financial system.

•Bailout Nation: How, Greed and Easy Money Corrupted Wall Street and Shook the World Economy by Barry Ritholtz (Wiley, $25). Explores how the U.S. evolved from a rugged independent nation to a soft Bailout Nation, where financial firms are allowed to self-regulate in good times, but are bailed out by taxpayers in bad times.

•The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System by Charles Gasparino (HarperBusiness, $28). Argues that the financial collapse was just the latest in a 30-year pattern of executive excesses, unsustainable leverage, massive hidden losses and unreliable computer models. Gasparino is not optimistic that something similar won’t happen again.

•The Great Money Binge: Spending Our Way to Socialism by George Melloan (Threshold Editions, $26). Champions the cause of supply-side economics, believing President Obama’s adoption of Keynesianism ultimately will result in rising interest rates, higher taxes and disastrous inflation.

•The Myth of the Rational Market: A History of Risk, Reward, and Delusion on Wall Street by Justin Fox (HarperBusiness, $28). Attempts to explode once and for all the efficient-market hypothesis, a canon of capitalism. That’s the hypothesis that asserts that prices of traded assets reflect all available information, a tough claim to make in the aftermath of the mortgage meltdown.

•Last Man Standing: The Ascent of Jamie Dimon and JPMorgan Chase by Duff McDonald (Simon & Schuster, $28). Quilts together Dimon anecdotes from first-person sources, resulting in a business bio that’s flattering but not fawning. Reveals an able banker who burnishes the reputation of JPMorgan at a time when other Wall Street CEOs watch their companies crumble.

•Fool’s Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe by Gillian Tett (Free Press, $26). Digs to the origins of the financial crisis guided by in-depth access to members of the JPMorgan team that developed collateralized debt obligations, revealing how the exotic investment product was conceived on a weekend at the luxurious Boca Raton Hotel in June 1994.

•Collateral Damaged: The Marketing of Consumer Debt to America by Charles Geisst (Bloomberg Press, $28). Traces America’s credit history and finds it riddled with sleepy regulators, congressional do-badders and slippery financial firms making euphemistic pitches to consumers to drum up business.

•How Capitalism Will Save Us: Why Free People and Free Markets Are the Best Answer in Today’s Economy by Steve Forbes and Elizabeth Ames (Crown Business, $25). A rebuttal to those writing free-market capitalism’s obituary. Explains how capitalism really works, arguing that the system is the world’s great economic success story despite the financial crisis and the worst recession in decades.

•House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William Cohan (Doubleday, $28). A minute-by-minute account of the last 10 days of Bear Stearns, the 85-year-old investment bank that caved under the weight of a huge position in mortgage-backed securities accumulated without regard to the instability of underlying subprime loans.

•This Time is Different: Eight Centuries of Financial Folly by Carmen Reinhart and Kenneth Rogoff (Princeton University Press, $35). A history of financial debacles up to the current crisis, revealing the unending cycle of boom and bust and how politicians and regulators chronically fail to divine recurring signs of bubbles.

•The Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence McDonald (Crown Business, $27). A Wall Street insider and former Lehman trader reflects on the collapse of the nation’s oldest investment bank, a venerable vessel run aground by executives with a reckless addiction to financial leverage and a simplistic grasp of structured finance.

•In Fed We Trust: Ben Bernanke’s War on the Great Panic by David Wessel (Crown Business, $27). Explains how Bernanke, steeped in the history of miscues by the Federal Reserve during the Great Depression, acted boldly in spearheading the biggest government intervention in more than half a century, effectively making the Fed the fourth branch of government.

•The Greatest Trade Ever: The Behind-the-Scenes Story of How John Paulson Defied Wall Street and Made Financial History by Gregory Zuckerman (Broadway Books, $26). Story of how a renegade hedge fund manager outwitted the mortgage-market cognoscenti, betting the market was headed for a major fall, a bet that earned more than $15 billion for his firm.

•Meltdown Iceland: Lessons on the World Financial Crisis from a Small Bankrupt Island by Roger Boyes (Bloomsbury USA, $25). A tale of irrational exuberance and miscalculation by perhaps no more than 30 bankers that wrecked the economy of an island nation of 300,000 people, wiping out all the wealth accumulated the previous decade.

by kevin

Barry Ritholtz has written a must read book (assuming you’re interested in how we got in the pickle we’re in) called Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy.  Basically I underlined the entire book when I read it.

Bailout Nation

Bill Fleckenstein (Foreword). Wiley 2009, Hardcover, 332 pages, $14.55

Reading back over my notes I was re-struck (is that a word?) by Barry’s point of view on what drove the vaunted American Consumer-led economy (we buy all the world’s doo dads): Real Estate.

According to a 2005 study by Asha Bangalore of Northern Trust Company, 43 percent of all new job creation between November 2001 and April 2005 was real estate related.

So what did that mean . . .

The housing boom was creating jobs for builders, contractors, real estate agents, mortgage brokers, and even employees at Home Depot and Lowe’s. But the most significant impact to the economy came from home equity lines of credit (HELOCs) and cash-out mortgage refinancings. With wages stagnant, Americans turned to home equity withdrawals in order to maintain their standard of living.

This was one of the single biggest and most unexpected elements of the debt-driven economic expansion. Outside of real estate, employment gains were modest and real wage gains flat. It was debt that drove the increase in consumer spending. Mortgage equity withdrawals normally a small portion of consumer debt‚exploded.

Without this home equity-based consumption, the nation would have been in recession territory, with GDP flat to 1 percent. At least, according to an unofficial Fed study by none other than Alan Greenspan

And this . . .

The wealth effect of home price appreciation is much more widely distributed than stocks. This made the generational-low interest rates the single largest factor that resuscitated the economy. Sure, tax cuts, deficit spending, increased money supply, war spending, and the like all played a role‚but it was the ultralow rates and the mortgage equity withdrawal they allowed that dominated U.S. economic activity.

As a result, the economy will continue to look  crappy to wage earners for some time to come (assets are still mispriced).

The book is just brilliant. Read it.

PERMALINK

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Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis — and Themselves, by Andrew Ross Sorkin

WHAT: A virtually minute-by-minute account of the scariest hours of the crisis, beginning in the aftermath of the seizures of Fannie Mae and Freddie Mac and concluding with TARP and the hastily assembled near-afterthought that was the $180 billion AIG bailout.

BEST BIT: On page 120 appears the first print mention of the rumored affair between Joe Gregory, the widely reviled chief operating officer of Lehman Brothers, and Erin Callan, the statuesque, blonde, wholly inexperienced tax attorney promoted to chief financial officer of the firm at the beginning of the year. According to the book, Callan separated from her husband “around the time” of the promotion, after which she and Gregory “became inseparable.”

RATING: Aa1

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers, by Lawrence McDonald with Patrick Robinson

WHAT: The story of the firm’s failure as told through the perspective of a group of in-house dissidents who saw disaster approaching back in 2005 and tried repeatedly (and vainly) to warn CEO Dick Fuld. One of the most compelling of the current crisis chronicles and possibly the most engagingly written.

BEST BIT: In a meeting of the bank’s executive committee in the fall of 2006, fixed-income chief Mike Gelband appealed to Fuld to go bearish on the market, and launched into a lengthy explanation of the dangers posed by the pending collapse of massively leveraged structured investment vehicles (or SIVs):

The chairman didn’t get it. But he realized he needed clarification. In front of Mike, he called Henry Paulson, the secretary of the United States Treasury and a former CEO of Goldman Sachs. Dick did not even try to get into the details of the problem, and quickly handed the phone to Mike, who pointed out with immense clarity the serious problems recently developing in the asset-backed commercial paper market and its deadly potential impact on the giant leveraged SIVs, to which Wall Street and the largest commercial banks were exposed. Mike thought this would lead to a serious credit freeze, one that he believed was shimmering on the horizon. To this day, Henry Paulson, with a supreme grasp of the subject, insists that the first person ever to warn him of the coming catastrophe was Mike Gelband.

About eighteen months and $200 billion in perversely ill-advised commercial real estate investments later, Paulson counsels Fuld at a private dinner to begin selling off assets with all deliberate speed — and Fuld tells him he’ll do so on his own watch, thank you very much.

RATING: Aaa

House of Cards: A Tale of Hubris and Wretched Excess, by William Cohan

WHAT: A play-by-play account of the collapse of Bear Stearns, told largely in an “oral history” style that sacrifices mention of former CEO Jimmy Cayne’s famous reefer-smoking habit for Cayne’s completely insane uncensored opinion of Tim Geithner.

BEST BIT: It’s ancient history, but this bit on former Bear chairman Ace Greenberg should not be overlooked:

Greenberg’s most peculiar donation was his $1 million gift, in June 1998, to pay for Viagra prescriptions for men who could not otherwise afford them. Most people couldn’t resist thinking that Greenberg had donated a million dollars for homeless men to have sex. He defended the gift despite the criticism. “I own stock in Pfizer,” he told the New York Times, referring to the drug’s manufacturer. “So It’s not altruistic. You can quote me on that … If you ask me how long I’ve been interested in the subject, I guess you can say I’ve been interested in it since I was 13 or 14.”

RATING: A1

The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System, by Charles Gasparino

WHAT: How It All Happened, as told through the greedy, arrogant, overpaid, and power-addicted assholes who made fortunes setting the stage for a multi-trillion-dollar meltdown and 17 percent real unemployment rates! This is the most comprehensive portrait of the characters that hastened the crisis.

BEST BIT: In a book as redolent of juice as this, it’s almost a shame to boil it down to another anecdote about Jimmy Cayne. But we couldn’t pass up this anecdote from Cayne’s old buddy Phil “Filthy” Cohen, with whom Cayne has since had a falling-out:

Cohen recalls one such incident of Cayne’s free-living lifestyle: Cayne called him to his forty-eighth floor corner office with its great view of the East River in Lower Manhattan to discuss some firm business. After a couple minutes of small talk, Cohen says Cayne reached down into his desk and pulled out a blue Bromo Seltzer bottle. (Bromo Seltzer is a white powdery antacid.) “What do you think’s in here?” Cayne said, according to Cohen’s recollection. “Bromo Seltzer?” Cohen asked, slightly bewildered. “No, it’s filled with cocaine,” Cayne said with a smile. Cohen never checked to see if that was true, and Cayne in an interview says he has never done coke (he also called Cohen’s account “patent bullshit”).

RATING: Aa2

And Then The Roof Caved In: How Wall Street’s Greed And Stupidity Brought Capitalism To Its Knees, by David Faber

WHAT: A slim yet substantial book based on Faber’s riveting (and horrifying) CNBC special “House of Cards” that takes readers from the mosquito-ridden swimming pools of option-ARM ghost towns to a Norwegian town bankrupted by ill-advised investments in “synthetic” bonds on the mortgages left behind.

BEST BIT: Chapter five consists mostly of a heated face-off between Alan Greenspan and FDIC chairman Sheila Bair over whether the government could have prevented the mortgage meltdown. A sample from Bair:

I mean, we’re not talking about rocket science here. We’re talking about underwriting at the fully indexed rate. Meaning when you make a loan, make sure they can take it when it resets, not at the initial [teaser] rate. We’re talking about verifying income … Seventy five percent of subprime loans end up being for refinancings … These were not new homeowners, but people who had been in their homes for many years and might have had some equity before they got [confusing adjustable rate mortgages]. It’s a very sad chapter for the history of mortgage finance in this country …

And the old Maestro:

But remember, the ultimate regulation is essentially a planned economy in which everything is constrained. You can’t do anything without getting permission, and these systems collapse.

Ah, yes … well, at least we can trust the unregulated free market to avoid systemic collapse!

RATING: A2

Fool’s Gold: How The Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted By Wall Street Greed And Unleashed A Catastrophe, by Gillian Tett

WHAT: The (chock full of hubris!) story of the folks who brought you the credit default swap and the synthetic collateralized debt obligation, by a Financial Times columnist. Ironically, they invented these things at JPMorgan — the only bank that didn’t almost explode as a result!

BEST BIT: On page 56, a former “journalist from Dow Jones” who “had extensive contact” with the derivatives team is quoted:

When you heard these guys speak, you realized that they really believed this stuff. They thought they were the smartest guys on the planet. They had found this brilliant way to get around the [Basel] rules, to play around with all this risk. And they were just so proud of what they’d done.

The journalist is former “Page Six” editor Paula Froelich.

RATING: Baa2

Last Man Standing: The Ascent Of Jamie Dimon And JPMorgan Chase, by Duff McDonald

WHAT: A comprehensive biography of JPMorgan Chase CEO Jamie Dimon, whose cash-hoarding ways and disdain for derivatives helped make him the undisputed victor — the press release goes so far as to dub him a “hero” — of the financial crisis.

BEST BIT: Dimon is relentlessly winsome for a banker, from the weird outfits that won him the distinction “absolute worst dresser” at Harvard Business School to his love of Shakespeare and Sinatra, but this bit of brown-nosing last October was our favorite detail:

Ever a student of history, Dimon sent Paulson a note including a citation from a speech Theodore Roosevelt made in Paris in 1910: “It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man in the arena, whose face is marred by dust and sweat and blood, who strives valiantly, who errs and comes up short again and again, because there is no effort without error or shortcoming but who knows the great enthusiasms, the great devotions, who spends himself for a worthy cause; who, at the best, knows in the end, the triumph of high achievement, and who, at the worst, if he fails, at least he fails while daring greatly, so that his place shall never be with those cold and timid souls who knew neither victory nor defeat.

(Which we would not have found as entertaining had we not read the following book … )

RATING: Aa3

In Fed We Trust: Ben Bernanke’s War On The Great Panic, by David Wessel

WHAT: A well-reported but restrained chronicle of the crisis as seen from the perspective of the Federal Reserve and its endearing chairman Ben Bernanke, by The Wall Street Journal‘s economics correspondent.

BEST BIT: Wessel’s biggest service is his abridged history of the Federal Reserve, which was created largely in response to the Panic of 1907, in which James Pierpont Morgan personally bailed out “the Bear Stearns of his day,” Knickerbocker Trust, to avert systemic disaster.

One constant through both panics, though, was a largely absent commander in chief. As Morgan wheeled and dealed, Teddy Roosevelt was hunting bear in the canebrakes of northern Louisiana. When he finally surfaced a few days later, the New York Times reported archly that “he had added several deeper shades of tan to the bronze acquired during the summer months.”

RATING: A1

A Failure of Capitalism: The Crisis of ‘08 And The Descent Into Depression, by Richard Posner

WHAT: A painfully dry explanation of the crisis by federal judge, legal scholar, prolific author, and Atlantic blogger Posner.

BEST BIT: Those who keep secret rosters of public intellectual fantasy teams will enjoy Posner’s defense of the “rational” role of emotion and greed on Wall Street decision-making on page 82:

Emotion does play a role in the behavior of businessmen and consumers, as of all human beings, but it is not necessarily or even typically irrational. It is a form of telescoped thinking, like intuition, and often it is superior to conscious analytic procedures.

Wait, wasn’t that the point of the Malcolm Gladwell book that Posner mercilessly skewered a few years ago in The New Republic?

RATING: Ba3

Bailout Nation: How Greed And Easy Money Corrupted Wall Street and Shook The Economy, by Barry Ritholtz

WHAT: A comprehensive crisis scrapbook compiled by the money manager behind the popular financial blog the Big Picture in a quippy, no-nonsense voice that sometimes successfully channels Barney Frank.

BEST BIT: “The Naughty Child Index” (page 206), in which the most notorious bank failures are explained in terms of the types of wayward children who were apparently running them.

Lehman Brothers is like the little kid pulling the tail of a dog. You know the kid is going to get hurt eventually, so no one is surprised when the dog turns around and bites him. But the kid hurts only himself and no one else. No one really cares that much. Bear Stearns is the little pyromaniac — the kid who is always playing with matches. He could not only harm himself, but burn the house down and indeed burn down the entire neighborhood. The Fed steps in to protect not him, but the rest of the block. AIG is the kid who accidentally stumbles into a biotech warfare lab and finds all these unlabeled vials. He heads out to the playground with a handful of them jammed into his pockets.

RATING: A1

Busted: Life Inside The Mortgage Meltdown, by Edmund Andrews

WHAT: The New York Times economics reporter’s sometimes-excruciating personal tale of taking on a series of ever-scarier subprime mortgages in an attempt to foster domestic bliss with a second wife while chronicling the effects of credit addiction writ large for the newspaper.

BEST BIT: If you felt bad for Andrews when libertarian blogger Megan McArdle eviscerated him for failing to disclose his wife, Sandy Patty’s, two (pre-marriage) personal bankruptcies in the book, you’ll feel really bad for Patty, who moves across the country to marry her childhood sweetheart only to struggle to find work and submit herself to years of panicked 3 a.m. lectures from Andrews about how she doesn’t understand his financial woes or she wouldn’t be frittering away his paychecks on “extravagances” like … fresh orange juice for the kids.

RATING: Aa3

*Moody’s bond credit ratings start at Aaa (Prime) and then descend through Aa1, Aa2, Aa3, A1, A2, A3, and then Baa1, Baa2, and so on.

Below is the PDF page from the 2010 edition, written by Jeff Hirsch:

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2010 Best Book

http://www.lvbusinesspress.com/articles/2009/10/05/news/iq_31501104.txt

There may be five stages of grief, but economics blogger Barry Ritholtz argues there are 10 stages of bailouts, all of which cause taxpayers grief. For example, a company (think American International Group or Bank of America) risks more money than it should. News trickles from insiders to industry-specific journalists. Corporate managers get antsy. The public panics. Later (hear those hooves?) government comes to the rescue.

In his raucous polemic, “Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy,” Ritholtz, who writes “The Big Picture” blog and is chief executive of New York equity research firm Fusion IQ, argues that bailouts are a perversion of capitalism with a mind-bending cost to taxpayers. He figures government bailouts in the last century have cost $14 trillion. That’s more money, he calculates, than the combined inflation-adjusted costs of the Marshall Plan, Louisiana Purchase, race to the moon, New Deal, Vietnam War, Korean War, savings-and-loan crisis, Iraq invasion and NASA space program.

Bailouts violate Wall Street’s “eat what you kill” ethos, Ritholtz argues.

“There are … market players who fail to live or die by their own swords — and then expect to be rescued by others from their own folly,” he writes.

Ritholtz traces bad-idea bailouts back to the early 1970s, when the government saved Lockheed Aircraft Corp. and Penn Central Railroad. Lockheed had been in trouble for years, Ritholtz notes, losing a combined $10.8 million in 1969 and 1970, and had miscalculated on several big U.S. military projects. It got $250 million in loan guarantees. Penn Central, which in 1970 was America’s largest passenger railroad, also had mounting losses; it got $125 million in loan guarantees. In 1976, Congress spent $7 billion in operating subsidies for what was left of Penn Central and five other flailing East Coast rail lines.

“If Lockheed was the government’s first gulp of bailout elixir,” Ritholtz writes, “Penn Central was a big gulp that opened the floodgates for the bailout binge that was to come.”

By saving Chrysler Corp. with $1.5 billion in loan guarantees and $2 billion in commitments or concessions from owners, stockholders and others, the government may have saved 200,000 jobs, Ritholtz writes, but it also forestalled changes that could have prevented further disaster. If Chrysler had failed, he reasons, Ford and General Motors might have rethought their designs and created more attractive, efficient cars. And, he argues, the United Auto Workers, having seen the loss of thousands of union jobs, might have traded pension guarantees and health-care benefits for equity in the remaining Big Two. Carmakers would have been stronger going forward, he argues.

Ritholtz says President Ronald Reagan ushered in a deregulation trend that blossomed into nonregulation, or as he calls it, nonfeasance. Disaster followed, he says.

The 1999 repeal of the Depression-era Glass Steagall Act eliminated rules prohibiting bank holding companies from owning other financial companies. Minus Glass Steagall, Ritholtz writes, the new banking-center companies started underwriting all sorts of exotic products, including credit default swaps and collateralized debt obligations.

Ritholtz finds two main villains behind the current crisis: former Federal Reserve Chairman Alan Greenspan and former President George W. Bush. Greenspan, he said, allowed the housing bubble to inflate by cutting and keeping the federal funds rate, the interest rate at which banks lend to one another, below 1.75 from December 2001 to September 2004.

Although he blames President Bill Clinton for allowing the repeal of Glass Steagall and the passage of the Commodity Futures Modernization Act, which exempted derivatives from regulation, Ritholtz says Bush caused more damage making bad choices for leaders of the Securities and Exchange Commission and Federal Reserve and Treasury Department and for letting his free-markets-reign-supreme ideology rule.

Ritholtz covers the topics in a conversational, digestible way. People who missed the recent news, or slept in economics class, will emerge enlightened, and maybe enraged. They may also be exhausted by the book’s steady spray of superlatives. Reading them all was like having my head banged against a metal locker: “massive” (bam!) “tremendous” (bam!) “unbelievably enormous” (bam!).

~~~

“Bailout Nation: How Greed and Easy Money Corrupted Wall Street and Shook the World Economy” by Barry Ritholtz, 332 pages, Wiley, $24.95.

Matthew Crowley is a copy editor for the Business Press’ sister publication, the Las Vegas Review-Journal. He can be reached atmcrowley@reviewjournal.com or 702-383-0304.