I remember 2008 as the year my childhood neighborhood froze in place. Half the houses were just cinderblock, 2x4's, & a few sheets of Tyvec. Some had stairs built between the first and second story littered with rusting hardware. It was like a single bell had rung and called every construction crew in Central Florida home to roost. The frames stayed hollow for years afterward.
My parents showed up with Banker's Boxes full of office paraphernalia (a nomenclatural irony I failed to appreciate at the time) in quick succession as the ripples reached their disparate economic sectors. The southeastern regional lender was raided by the FBI. Conversations all at once grew quiet, but I was too young to trace the common etiology of the events in contemporaneous time.
Adding quantitative color to my qualitative memory, in Adam Tooze’s words:
In the worst-hit areas, such as Florida, fully 12 percent of properties were given up by their owners or seized by banks for foreclosure. Foreclosure proceedings were operating at such a pace that they were given over to quasi-automated legal processes that turned out to be ruinously flawed.
Crashed tells the story of the 2008 financial crisis I witnessed at the ragged fringe of the American economy from within the political power centers and central banks of the US and Europe. Tooze's economic expertise shines in his coverage of highly technical financial mechanisms that both enabled the crash (asset backed commercial paper, repo markets, dollar-denominated debts of foreign bank lenders, differential capital requirements in the Basel II agreement) and led to counterintuitive outcomes during the recovery (e.g. rapid decline in US Treasury yields as Europe entered austerity, central bank swap lines). Tooze's analysis shines a light on the precarity of the modern financial system, where leverage is compounded atop leverage such that single points of failure can cascade into a systemic collapse.
As a political history, Crashed provides a window into the European experience for an American audience that likely experienced the various transatlantic aftershocks of 2008 as discrete events, rather than a continual unravelling from the initial crisis. Both the eurozone debt crises and Eastern European shooting wars in Georgia and Ukraine are revealed to have close ties to the broad based economic declines of 2008, exacerbated by the failed austerity politics advocated by the Bundestag, old line IMF bureaucrats, and the German public.
Tooze is equally irreverent in his coverage of the policy responses in the US (bank bailouts! billion dollar bonuses!) and Europe (pinheaded austerity! kitchen table logic applied to sovereign balance sheets!). Clearly, it seems that the US response was superior to that of the eurozone in terms of economic recovery, but the superiority is less obvious to me after accounting for the costs in political capital. Tooze's history elegantly traces the amplification of policy incoherence on the US political right to tensions that emerged in the crisis and the ensuing public outcry from aggressive Fed policy that aided financial elites while the majority of the US population experienced a prolonged labor market slump. Given this reality and the extreme tail risks incurred by destabilization of the political system in the world's largest economy, one can make a case that the economically rash but politically savvy response of Eurozone leaders has more merit than Tooze is willing to acknowledge.
The most unsettling lesson of Crashed is that the underlying structure of the financial system is little changed from 2007. The Dodd-Frank legislation in the US was implemented as a set of added powers and mandates for the regulatory agencies, providing the current executive administration with the flexibility to relax those safeguards in the name of deregulation if desired. Likewise, the European banking sector that amplified the US mortgage crisis through risky dollar-denominated lending has seen little fundamental reform. The crisis taught the world how to react to a systemic shock to the financial system, but perhaps not how to reform the system in order to prevent the next event.