Isabelle Beauchamps's List: Economy

“This recession,” President Obama said recently, “was not caused by a normal downturn in the business cycle. It was caused by a perfect storm of irresponsibility and poor decision-making that stretched from Wall Street to Washington to Main Street.” Richard A. Posner is having none of it. A perfect storm, yes: but a storm of responsibility and reasonable decision-making. The Crash of ’08 happened because businesspeople and consumers did what markets and society expect them to do. Don’t blame capitalists or, for the most part, government. Blame capitalism.

To understand the calamity on Wall Street, we need erudite financial analysis and good old-fashioned stories about human fallibility. Gillian Tett, who oversees global market coverage for The Financial Times, offers some of each. In “Fool’s Gold,” she describes how a small group of bankers at storied J. P. Morgan built a monster that got out of control and helped destroy much of their industry. Tett’s tale doesn’t explain all of the recent mayhem, but it is one place to start.

Last October, Alan Greenspan — who had spent years assuring investors that all was well with the American financial system — declared himself to be in a state of “shocked disbelief.” After all, the best and brightest had assured him our financial system was sound: “In recent decades, a vast risk management and pricing system has evolved, combining the best insights of mathematicians and finance experts supported by major advances in computer and communications technology. . . . The whole intellectual edifice, however, collapsed in the summer of last year.”

Forget Stephen King. For readers determined to decipher the baffling collapse of Wall Street, David Wessel’s account of what has transpired behind closed doors in Washington over the past couple of years provides a tale that’s nothing short of hair-raising.

The effects of foreclosures and the financial crisis on a small working-class community in Southern California

Two leading financial journalists have made worthy additions to the increasingly crowded shelf of books on our recent economic failure. In very different ways, John Cassidy and Andrew Ross Sorkin address the critical question of what exactly happened on Wall Street. Until we settle on at least a rough answer, we won’t have a prayer of preventing the next crisis.