Too Big to Save

Too Big to Save: How to Fix the US Financial System

This post is a review of Robert Pozen’s recent book, “Too Big to Save: How to Fix the US Financial System” by Sean Cameron, MBA Candidate at Harvard Business School.

Bob Pozen’s book, Too Big to Save: How to Fix the US Financial System is one of the most important books on financial reform written to date. The book not only provides an overview of how the US economy entered into a deep recession, but also a comprehensive plan for reform and a return to growth. Filled with original insight, the book clearly explains the failure of our modern capitalist society that has morphed into one-way capitalism that penalizes taxpayers who do not participate in upside gains but are exposed to losses from bailed out financial institutions. The book offers pragmatic advice for policymakers and important guidelines for all readers to understand the nature, causes, and appropriate reforms associated with the current US financial crisis. There has not been a more timely and important book written this decade.

Furthermore, Bob Pozen approaches each potential idea of reform with a well-reasoned perspective on the legal, economic, political and cultural implications of such reform. Pozen has a unique ability to describe complex phenomona such as the housing boom and bust and explosive growth in the use and complexity of financial derivatives with ease. His grasp of the complex issues is second to none, and his ability to convey these complex ideas in easily understandable, succinct prose is remarkable. Pozen’s suggestions for reform – including reducing moral hazard problems, strengthening boards, and improving the regulatory system – present feasible, necessary steps that policymakers must heed to improve financial markets and the real economy.

The book is presented in four parts: The US housing slump and the global financial crisis, the impact on public markets, evaluating the bailout act of 2008, and the future of the American financial system. Most books on crises tend to be more descriptive then prescriptive and stop with an evaluation of the events that unfolded throughout the crisis. Bob Pozen is particularly adept at proposing solutions to market failures and government policy mistakes. His analysis of the housing slump and impact on global markets is as sharp and well-informed as notable economists such and is the most refreshing look at the causes of asset bubbles and ensuing busts since Robert Shiller’s “Irrational Exuberance”. His analysis of the bailout act of 2008 and the future of the American financial system do not merely identify the flaws in our financial system but also clearly layout a blueprint for reform and recovery. The book is not an esoteric, ivory tower rumination of the events that have unfolded since 2008 but a pragmatic manual on reform that is refreshingly readable.

In summary, Too Big to Save is comprehensive, rigorous, and descriptive as well as prescriptive. The US economy is too important a global player to be ignored, and Pozen’s analysis in “Too Big Too Save” is too important to not be read. This book is truly a gem and a strongly recommended read. Pozen has the in-depth, sound thought processes of a prominent academic from his experience as a senior lecturor at the Harvard Business School as well as his experience on the front line of reform and change through his experiences as Chairman of MFS Investments, Chairman of the SEC advisory committee on improving financial reporting, and member of President Bush’s Commission to Strengthen Social Security. Read this book.