Slapped by the Invisible Hand: The Panic of 2007 (Financial Management Association Survey and Synthesis) |  | Author: Gary B. Gorton
Publisher: Oxford University Press, USA
Category: Book
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Rating:  6 reviews
Sales Rank: 17,433
Media: Hardcover
Pages: 240
Number Of Items: 1
Shipping Weight (lbs): 1.2
Dimensions (in): 9.3 x 6.4 x 0.9
ISBN: 0199734151
Dewey Decimal Number: 332.10973
EAN: 9780199734153
ASIN: 0199734151
Publication Date: March 8, 2010
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Product Description
Originally written for a conference of the Federal Reserve, Gary Gorton's "The Panic of 2007" garnered enormous attention and is considered by many to be the most convincing take on the recent economic meltdown. Now, in Slapped by the Invisible Hand, Gorton builds upon this seminal work, explaining how the securitized-banking system, the nexus of financial markets and instruments unknown to most people, stands at the heart of the financial crisis.
Gorton shows that the Panic of 2007 was not so different from the Panics of 1907 or of 1893, except that, in 2007, most people had never heard of the markets that were involved, didn't know how they worked, or what their purposes were. Terms like subprime mortgage, asset-backed commercial paper conduit, structured investment vehicle, credit derivative, securitization, or repo market were meaningless. In this superb volume, Gorton makes all of this crystal clear. He shows that the securitized banking system is, in fact, a real banking system, allowing institutional investors and firms to make enormous, short-term deposits. But as any banking system, it was vulnerable to a panic. Indeed the events starting in August 2007 can best be understood not as a retail panic involving individuals, but as a wholesale panic involving institutions, where large financial firms "ran" on other financial firms, making the system insolvent.
An authority on banking panics, Gorton is the ideal person to explain the financial calamity of 2007. Indeed, as the crisis unfolded, he was working inside an institution that played a central role in the collapse. Thus, this book presents the unparalleled and invaluable perspective of a top scholar who was also a key insider.
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| Customer Reviews:
Showing reviews 1-5 of 6
 How am I the first reviewer for this important book? March 29, 2010
V. Childers (Fairfield, CT USA)
10 out of 13 found this review helpful
I've been following Gorton's insights on the crisis for a while now. Having been in a position to witness the meltdown from a far-too-close-for-comfort situation myself, I find his reading of the event(s), unlike so many other narratives making the rounds, rings true. What we witnessed was a "new-fashioned" banking panic. How did it happen? Why did it happen? Can it happen again? Yep, you should probably read the book....
The financial meltdown- the best explanation yet April 2, 2010
Robert Kaufman
7 out of 10 found this review helpful
I've read a lot of books about the financial meltdown, and so far this is the best.
If you want to read a very intelligent and well written book about this subject
then go out and buy this book. Aside from his wonderful analysis of the background
of the meltdown, he also offers very reasonable suggestions on how to prevent
the next one. My only criticism of this wonderful book is that he should have included
a glossary.
a wonderful book! June 1, 2010
Beloved Charles (Hong Kong)
This book by Gary Gorton is really wonderful. I had some training in macro but never really learnt much in banking. And at first, I did NOT see why Prof Gorton would talk about the banking more than a century ago. Later on, however, Prof Gorton makes it clear that the "structure of the crisis," so to speak, is similar... and we might be able to minimize the damage created by the crisis if we knew all these...
 insight into the panic of 2007 May 22, 2010
Charles R. Williams (Akron, OH United States)
1 out of 1 found this review helpful
Gorton's explanations of the financial meltdown are the most plausible out there. Gorton has studied banking and banking panics for decades. Unlike other economists he has detailed knowledge of how the banking system has evolved and what exactly happened in the summer of 2007.
In a few words, the little guys bank at regulated commercial banks with deposit insurance. So the little guys don't panic when there are problems in the economy or in the banking system. The big guys put their cash in a shadow banking system where their "deposits" called repos are collateralized by asset backed securities. The system works well until the value of the collateral comes into question. This is what happened in the summer of 2007. The shadow banks had to dump asset backed securities en masse into the financial markets and there was on one to buy them. The price of asset backed securities as a whole began to fall and the shadow banking system froze up. Gorton points out that this is nothing other than a 19th century-style banking panic that occurred behind closed doors and was misinterpreted by economists and regulators who simply had no experience with this sort of event.
As another reviewer points out, the book is a hastily compiled collection of Gorton's papers. One might do better to find the papers on the internet.
Not for beginners June 17, 2010
Mary H. Lesser (Valdese, NC)
1 out of 1 found this review helpful
The book is an excellent study of the financial crisis but it's written more as an academic paper than as a book for general consumption. The equations on some pages would make the average person faint. If you have the background, it's a must read. If not, either give it a pass or be prepared for a slog.
Showing reviews 1-5 of 6
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