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THE CRUNCH: How greed and incompetence sparked
the credit crisis
Author: Alex Brummer
Published by rh Business Books

If this book was a thriller, it would be an exciting read leaving you tired but exhilarated at the end. Unfortunately it is not. It is in fact what has actually happened in the financial markets over the past decade.

When I put the book down, I felt depressed and disillusioned, because these events should never have happened. They should never have been allowed to happen. So many people have lost their life savings because of a group of bankers and financiers, who decided to set up a scheme that must rank as the biggest fraud of all time.

The sub-prime crisis in itself is a great enough problem. In essence, this involved banks in the US making housing loans to people that had no hope whatsoever of repaying the loans. It is estimated that up to 40% of these loans were commonly referred to as ‘liar loans’, because the applicants lied about their personal circumstances or that the circumstances were not supported by documentation. The tragedy is that banks parcelled these loans up with other instruments into tradeable securities, which were then sold into the market. The securities were stamped with a triple A rating by the rating agencies, although, if the rating agencies had done their homework, they would have known that they were nothing more than ‘junk bonds’.

Alex Brummer is an award-winning journalist based in the UK. He traces the roller coaster ride from the early days of sub-prime lending through to the present day financial crisis. US banks were not the only delinquents. In the UK, for example, Northern Rock and other home lenders, caught up in the frenzy of making huge profits, committed the cardinal banking error of borrowing short and lending long. As credit became more freely available, house prices escalated rapidly, and contributing to the euphoria were the huge bonuses that drove executive behaviour.

Brummer describes how the banks and authorities tried to deal with the problems, leading eventually to ‘bale outs’ and nationalisation. When liquidity tightened, property prices dropped and banks collapsed.

I would like to say it is fascinating but, in reality, it is tragic. However, it is a very good read and it opens one’s eyes to human nature.
CHOICE NOT FATE: The life and times of Trevor Manuel
Author: Pippa Green
Published by Penguin Books

I fear that I bristle when I hear white people from my generation saying they didn’t know what was happening during the ‘apartheid’ years. Of course they knew – we all had a good idea of what was going on. At least I thought so, until I read this book! I grew up in Cape Town on the other side of the line, so to speak, and I must admit that I did not know what pain many of the coloured people were suffering during the 70s and 80s.

‘Choice Not Fate’ is a quite amazing book. It is so rich and full of emotion and it paints a human picture of a highly extraordinary man. I remember attending a meeting of the Council of the International Federation of Accountants in Kleinmond. Trevor Manuel addressed that meeting for about one hour. After he had finished, the entire Council stood and applauded him. One of the US delegates said after the session, “If our Secretary for Finance knew half as much about the accounting profession, America would be a far better place”.

This is a remarkable book about a remarkable man. His knowledge and understanding of the world of finance and economics is outstanding. The book covers the various stages of his life. First his early life and the hardships he faced, then his years of the struggle. Suddenly he found himself on the other side. Now, he had to learn quickly, as he was expected to map out the economic future of our country with very little knowledge and experience on which to draw Finally, it covers his years as Minister of Finance and his growing confidence. He is now the longest serving Finance Minister in the G20, and he enjoys the widest acclaim.

This is a book every CA(SA) must read. It is carefully crafted and deals with each stage of his life in a well-balanced and insightful way.

HOT, FLAT AND CROWDED
Author: Thomas L Friedman
Published by Allen Lane in 2008

If you enjoyed Thomas Friedman’s landmark book ‘The World is Flat’ (2005), you will undoubtedly find his new book ‘Hot, Flat and Crowded’ well worth reading.

In ‘The World is Flat’ he argued that the technology revolution was levelling the economic playing field and enabling more people around the world to connect and compete in a new dimension of globalisation.

In his new book, he explains how global warming, rapidly growing populations and a mushrooming middle class, are producing a planet that is “hot, flat and crowded”.

He makes it very clear that humankind faces its biggest threat ever, and it has little time to take corrective action.

The main body of the book is about what is currently being done and what needs to be done to combat this enormous threat.

In a chapter particularly relevant to Africa, he discusses ‘energy poverty’. He says Africa’s biggest problem is its lack of a sustainable energy. In the modern world you need energy, yet the whole of sub-Saharan Africa, excluding South Africa, produces less electricity than the Netherlands. There are champions for AIDS, there are champions for poverty, but nobody is championing ‘energy’ in Africa. Yet Africa will not be able to rise up and create a sustainable future without energy security.

This is a fascinating book and an essential read for anyone involved in business strategy.

Reviewer: Graham Terry CA(SA), is Head – Office of the Executive President, SAICA.

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