A Call for Judgment: Sensible Finance for a Dynamic Economy

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Oxford University Press, Oct 1, 2010 - Business & Economics - 368 pages
Our prosperity requires the enterprise of innumerable individuals and businesses who exercise their imagination and judgment-and bear responsibility for outcomes. And widespread enterprise is fostered through dialogue and relationships, not merely prices in anonymous markets. Yet modern finance blatantly neglects these necessary elements for enterprise. In the last several decades finance has become increasingly centralized, distanced, and mechanistic. Instead of many lending officers making judgments about borrowers they know, credit decisions are the output of the models of a few Wall Street wizards and credit agencies. This robotic centralized finance stifles the dynamism of the real economy and leads to recurring collapses. A Call for Judgment clearly explains how bad theories and mis-regulation have caused a dangerous divergence between the real economy and finance. In simple language Bhidé takes apart the so-called advances in modern finance, showing how backward-looking, top-down models were used to mass-produce toxic products. Thanks to excessively tight securities laws and loose banking laws, anonymous transactions have displaced relationship-based finance. And Bhidé offers, tough simple rules for restoring relationships and case-by-case judgment: limit banks--and all deposit taking institutions--to basic lending and nothing else. A Call for Judgment is both a primer on the role of finance in a dynamic modern economy, and a cautionary tale about the pitfalls of banks functioning as highly centralized, mechanistic entities. It is essential reading for anyone interested in bringing the economy back to a point at which decisions can be made that foster organic economic growth without the potentially disastrous risks currently accepted by modern finance.
 

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Decentralized decision making is essential to capitalism. Entrepreneurial inspiration and innovation can advance society faster than the slow march of a centralized, government-planned economy. But like government bureaucracies that become unmanageably large, oversized banks also can impede progress. Simply allowing market forces to determine the size and scope of the big banks is debatable public policy, but bank mergers have led to centralization and to the mechanization of lending, thus adding systemic risk to the US banking system. This far-reaching book includes a rich history of this industry’s development and a detailed account of its destabilizing role in the 2008 financial panic. Amar Bhidé – a business professor and a trader –describes more than he prescribes, and his prescription is as controversial as it is compact: Limit severely what banks can do. getAbstract recommends the book to readers seeking a deeper understanding of how financial institutions drive, and sometimes derail, the entire economy.
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http://www.getabstract.com/en/summary/industries/a-call-for-judgment/14967/
 

Contents

Introduction
1
Ordering the Innovation Game Beyond Decentralization and Prices
27
Why It Became So
81
Acknowledgments
299
Notes
301
References
323
Index
335
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About the author (2010)

Amar Bhidé, Schmidheiny Professor at the Fletcher School at Tufts University, has served as Glaubinger Professor of Business at Columbia University, a consultant at McKinsey & Company and a proprietary trader at E.F. Hutton. Bhidé is a founding member of the Center on Capitalism and Society, editor of Capitalism and Society, and has written about the financial crisis in the Wall Street Journal, Business Week, and Forbes. Author of The Venturesome Economy, The Origin and Evolution of New Businesses, and Of Politics and Economic Reality, Bhidé received a doctorate and an MBA with high distinction from the Harvard Business School.

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