The Lost Prophets: The Decline of the Financial Industry and the Case for Radical Reform

Introduction

In his groundbreaking book, "The Lost Prophets," Alfred L. Malabre Jr. delivers a scathing indictment of the financial industry, arguing that it has lost its way and is in dire need of radical reform. Malabre, a veteran financial journalist, draws on decades of experience to provide a comprehensive and deeply researched account of the industry's decline, from the deregulation of the 1980s to the financial crisis of 2008.

The Deregulation of the 1980s

The deregulation of the financial industry in the 1980s, spearheaded by the Reagan administration, was a watershed moment that set the stage for the industry's subsequent decline. Malabre argues that deregulation, which was intended to promote competition and innovation, instead led to a concentration of power in the hands of a few large banks and financial institutions. This concentration of power, combined with a lack of oversight, created an environment ripe for abuse and ultimately led to the financial crisis of 2008.

The Financial Crisis of 2008

The financial crisis of 2008 was the culmination of decades of deregulation and mismanagement in the financial industry. Malabre provides a detailed account of the events leading up to the crisis, including the subprime mortgage market, the collapse of Lehman Brothers, and the government's bailout of the financial system. He argues that the crisis was not simply a case of bad luck, but rather the result of systemic failures in the financial industry and a lack of oversight by regulators.

The Case for Radical Reform

In the wake of the financial crisis, Malabre argues that radical reform of the financial industry is essential to prevent future crises. He proposes a number of reforms, including:

• Re-regulating the financial industry: Malabre argues that the industry needs to be re-regulated to prevent the concentration of power and to ensure that banks and financial institutions are held accountable for their actions.
• Breaking up the big banks: Malabre argues that the large banks that were bailed out by the government in 2008 are too big to fail and pose a systemic risk to the financial system. He proposes breaking up these banks into smaller, more manageable institutions.
• Creating a new regulatory framework: Malabre argues that the current regulatory framework is inadequate and needs to be replaced with a new framework that is more effective in preventing financial crises.

Conclusion

"The Lost Prophets" is a must-read for anyone who wants to understand the financial industry and the causes of the financial crisis of 2008. Malabre's incisive analysis and compelling arguments make a strong case for radical reform of the financial industry. This book is a wake-up call that we cannot afford to ignore.