Reading List: History of Financial Market Fraud

Jim Chanos teaches a class at Yale called "History of Financial Market Fraud: A Forensic Approach." The following reading list is based on the reading list as published in the course syllabus. 

This is the most comprehensive and in-depth reading list on both fraud and the history of financial markets that I have come across.

Few of us have the chance to hear Jim Chanos speak in person, let alone attend a class of his. 





  • The Models of Cues and Deceits
  • Financial Frauds in the 17th and 18th Centuries – Similarities and Differences Between the English Stock Market Boom (1690s), the Mississippi Bubble (1719-1720), the South Sea Bubble (1720), and Railroad Booms and Busts in the U.K. (1843 – 1845)
  • Crédit Mobilier (1870s), Ponzi and the “Match King”
  • Shameless Chicanery and Wall Street’s “Hellhound;” The 60s/70s: The “Go-Go-Years;” The 80s: Junk Bonds/Drexel/Milken, Savings and Loan Crisis
  • 90s “Boiler Rooms;” Lessons from Enron, WorldCom, Tyco, etc.: Finding the “Dogs” behind Financial Statements’ “Ducks”
  • The Implosion; The Great Collapse 2007-2009: Financial Detectives’ Epic Battles for the Truth. Were We All to Blame but No One Was at Fault? Too Big to Fail and Jail?
  • Déjà vu? The New “John Laws” and “Ivar Kreugers.” The Cases of China and Trump


Book recommendations:

These are books with the comment "read entire book" in the reading list.

Schilit/Perler, Financial Shenanigans

Frank Partnoy, The Match King: Ivar Kreuger. The Financial Genius behind a Century of Wall Street Scandals

John Brooks, Once in Golconda: A True Drama of Wall Street, 1920-1928

John Brooks. The Go-Go Years. The Drama and Crushing Finale of Wall Street’s Bullish ‘60s

Bethany McLean and Peter Elkind, The Smartest Guys in the Room. The Amazing Rise and Scandalous Fall of Enron

Murphy, The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble

“Adam Smith” (aka George J. W. Goodman). The Money Game


The Models of Cues and Deceits

Required reading

Financial Shenanigans


Manias, Panics, and Crashes: A History of Financial Crises
Kindleberger/Minsky: Charles P. Kindleberger and Robert Aliber, Boston: John Wiley & Sons, 2005
Chapter Two (“Anatomy of a Typical Crisis”), pages 24 – 37


Capital Returns
Edward Chancellor, London: Palgrave Macmillan, 2016
“Introduction,” pages 1 – 22, "The key to the ‘capital cycle’ approach…is to understand how changes in the amount of capital employed within an industry are likely to impact upon future returns.”


Fraud Triangle:
Other People's Money

Donald R. Cressey, Montclair, N.J.: Patterson Smith, 1973, p. 30


Control Fraud:
The Best Way to Rob a Bank is to Own One: How Corporate Executives and Politicians Looted the S&L Industry

William K. Black, Houston: University of Texas Press, 2005
Chapter One (“Theft by Deception: Control Fraud in the S&L Industry”)


“Bill Moyers Journal”
April 3, 2009


Ethical Collapse:
The Seven Signs of Ethical Collapse

Marianne M. Jennings, New York: St. Martin’s Press, 2006
Chapter One (“What are the Seven Signs? Where Did They Come From? Why Should Anyone Care?”), pages 1-16


Legal Fraud:

“The Misrepresentation of Earnings”
Ilia Dichev, John Graham, Campbell R. Harvey, and Shiva Rajgopal, Financial Analysts Journal. January/February 2016, Volume 72 Issue 1
The CFOs surveyed believe that, in any given period, 20% of public companies and 30% of private companies distort earnings, and the magnitude of the misrepresentation is at least 10% of reported earnings.


“Using Benford Analysis to Detect Fraud”
Clyde T. Stambaugh, Manuel A. Tipgos, Floyd W. Carpenter, and Murphy Smith, Murphy, Internal Auditing, Vol. 27, No. 3 (May 2012): 24-29
Irregular patterns of numbers may indicate fraudulent activity or material errors. The Benford Analysis Workbook can be accessed at: ISACA, “Using Spreadsheets and Benford’s Law to Test Accounting Data.”.

Association of Certified Fraud Examiners: Using Benford’s Law to Detect Fraud.


Recommended reading

“Financial Statement Irregularities: Evidence from the Distributional Properties of Financial Statement Numbers.”
Dan Amiram, Zahn Bozanic, and Ethan Rouen, Columbia Business School Research Paper, January 2, 2014
Researchers find that companies whose financial statements deviate from Benford’s Law are likely to be engaging in earnings manipulation. Companies with a higher deviation from Benford’s Law in the three years prior to fraud detection by the SEC suggest that “fraudulent firms are able to hide their activities using techniques that violate Benford’s Law, but only get caught if those techniques become unsustainable.”


“Do Chinese Activity Data Conform to Benford’s Law?”
ANZ Research, January 8, 2013
“Our preliminary tests on some selected Chinese activity data suggest that while all satisfy Benford’s first digit law, all of them fail to satisfy the second digit law when these data are published in percentage terms. Our application of Benford’s Law seems to have confirmed that most data published in percentage terms could have been subject to data manipulation, appearing to confirm long-rooted suspicions on the quality of Chinese data.”

“Accounting Informs Investors and Earnings Management is Rife: Two Questionable Beliefs.”
Ray Ball, Accounting Horizons, May 15, 2013
"Ball argues that financial statements do not provide a “relatively large proportion of the new information used by the equity market.” He also questions research methodologies used to prove the frequency of accounting manipulation."


Fraud: An American History from Barnum to Madoff
Edward J. Balliesen, Princeton University Press, 2017
Chapter Two: “The Shape-Shifting, Never-Changing World of Fraud. Pages 14 – 40.

“Highlights of fraud research Recent research brings new insights into fraud prevention and detection.”
Cynthia E. Bolt-Lee and Sara Kern, Journal of Accountancy.


“Using Nonfinancial Measures to Assess Fraud Risk.”
Joseph F. Brazel, Keith L. Jones, and Mark F. Zimbelman, July 20, 2009
“If auditors or other interested parties [e.g., directors, lenders, investors, or regulators] can identify nonfinancial measures [e.g., facilities growth] that are correlated with financial measures [e.g., revenue growth], inconsistent patterns between the nonfinancial and financial measures can be used to detect firms with high fraud risk. We find that the difference between financial and nonfinancial performance is significantly greater for firms that committed fraud than for their non-fraud competitors. … Manipulating . . . NFMs can be difficult to conceal because NFM verification is often straightforward. … Overall, our results provide empirical evidence suggesting that nonfinancial measures can be effectively used to assess the likelihood of fraud.”


“Bubbles, Financial Crises, and Systemic Risk.”
Markus K. Brunnermeier and Martin Oehmke


Capital Returns
Edward Chancellor, Palgrave Macmillan, 2016
“Introduction.” Pages 1 – 22: “The key to the ‘capital cycle’ approach…is to understand how changes in the amount of capital employed within an industry are likely to impact upon future returns.”


"Fooling the Auditors in Seven Easy Steps.”
Tracy Coenen, Minnesota Society of CPAs Footnote Magazine, February/March 2014


“Corporate Fraud and Managers' Behavior: Evidence from the Press.”
Jeffrey R. Cohen, Yuan Ding, Cédric Lesage, and Hervé Stolowy. October 06, 2010
“Based on evidence from press articles covering 39 corporate fraud cases that went public during the period 1998-2005, the objective of this paper is to examine the role of managers’ behavior in the commitment of the fraud.”


“Predicting Material Accounting Misstatements.”
P. M. Dechow, W. Ge, C. R. Larson, and R. G. Sloan, Contemporary Accounting Research 28 (2011) (1): 17-82.
Reviews 2,190 SEC Accounting and Auditing Enforcement Reports between 1982 and 2005 to identify firms with misstated quarterly or annual earnings. “We find that the overstatement of revenues, misstatement of expenses, and capitalizing costs are the most frequent types of misstatements. We find that at the time of misstatements, accrual quality is low and both financial and nonfinancial measures of performance are deteriorating. We also find that financing activities and related off-balance-sheet activities are much more likely during misstatement periods. Finally, we find that managers of misstating firms appear to be sensitive to their firm’s stock price. These firms have experienced strong recent earnings and price performance and trade at high valuations relative to fundamentals. The misstatements appear to be made with the objective of covering up a slowdown in financial performance in order to maintain high stock market valuations.”


“Earnings Quality: Evidence from the Field.”
Ilia D. Dichev, John R. Graham, Campbell R .Harvey, and Shivaram Rajgopal, September 9, 2012
"Researchers’ survey of CFOs finds: “[A]bout 50% of earnings quality is driven by non-discretionary factors; (iii) about 20% of firms manage earnings to misrepresent economic performance, and for such firms 10% of EPS is typically managed; (iv) CFOs believe that earnings manipulation is hard to unravel from the outside but suggest a number of red flags to identify managed earnings….”


“Structures of Corporate Scandal.”
Kurt Eichenwald, The HCCA Compliance Institute, May 11, 2010


Beyond Mechanical Markets: Asset Price Swings, Risk and the Role of the State.
Roman Frydman and Michael Goldberg, Princeton, New Jersey: Princeton University Press, 2011.
The authors suggest an approach that lies in-between efficient market theory and behavioral investing. They posit the “contingent-market hypothesis.” “The causal process underpinning price movements depends on available information, which includes observations concerning fundamental factors specific to each market. This process cannot be adequately characterized by an overarching model, defined as a rule that exactly relates market outcomes to available information up to a fully predetermined random error at all time periods, past, present and future.”


“Inexperienced Investors and Bubbles.”
Robin Greenwood and Stefan Nagel, NBER Working Paper #14111, 2008.
“Young managers, but not old managers, exhibit trend-chasing behavior in their technology stock investments” during the technology bubble of the late 1990s. “The economic significance of young managers' actions is amplified by large inflows into their funds prior to the peak in technology stock prices.”


“Analyzing Speech to Detect Financial Misreporting.“
Jessen L. Hobson, William J. Mayew, and Mohan Venkatachalam, October 9, 2011
Paper examines the role of vocal cues in detecting financial misreporting, using vocal emotion analysis software. The researchers focus on cognitive dissonance, “a state of psychological arousal and discomfort occurring when an individual takes actions that contrast with a belief, such as cheating while believing oneself to be honest.” “We find that cognitive dissonance in CEO speech can predict whether a firm’s quarterly financial reports will be adversely restated at better than chance levels. . . . [I]mportant nonverbal clues to detect financial misreporting are present in earnings conference calls.” Researchers caution about the limits, given the early stages of Layered Voice Analysis technologies and research methodologies.


“Chief Financial Officers’ Short—And Long-Term Incentives Based Compensation and Earnings Management.”
Sarawak Hossain and Gary S. Monroe, Australian Accounting Review, vol. 25, pp. 279 – 291.
Researchers conclude that a CFO’s compensation determines the method of earnings management used, particularly the accruals.


“Earnings Management and Employee Selection.”
Scott Jackson, Ling Harris, and Joel Owens, Working Paper, University of South Carolina.


“Evidence on Contagion in Earnings Management 2/1/2015
Simi Kedia, Kevin Koh, and Shivaram Rajgopal, Accounting Review (forthcoming): November 2015, Vol. 90, No. 6, pp. 2337-2373.
“Our findings suggest that a peer firm’s decision to manage earnings is not made in isolation. Rather, the decision seems to incorporate the nature of the restatement, the target firm announcing the restatement and the reaction of the regulators and litigators to the target firm’s announcement.”


“Classification Shifting Using the 'Corporate/Other' Segment.”
Bradley E. Lail, Wayne B. Thomas, and Glyn J. Winterbotham, April 26, 2013
This paper examines management’s use of the “corporate/other” segment of financial statements to “mask the true performance of operating (or core) segments. We find that managers take advantage of vague cost allocation requirements to shift expenses between the corporate/other segment and core segments. …This shifting increases the reported performance of underperforming core segments. In addition, when proprietary concerns are high (i.e., operations in less competitive industries), we find evidence consistent with corporate/other expenses being shifted to core segments. By shifting expenses to core segments, core profits are concealed when proprietary motives are present.”


“Behavioral Ethics, Behavioral Compliance.”
Donald C. Langevoort. In Research Handbook on Corporate Crime and Financial Misdealing, Jennifer Arlen, ed. July 25, 2015
“A study of how companies get into trouble for accounting fraud discovered, not surprisingly, that one can trace backwards from the sizable falsifications that in the end led to detection to much smaller ones earlier on (Schrand and Zechman, 2012). But more interestingly, it found that those early steps correlated with indicators of managerial overconfidence and over-optimism. That is to say, managers who were genuinely convinced of the company’s good prospects made more unrealistic projections.”


The End of Accounting and the Path Forward for Investors and Managers.
Baruch Lev and Feng Gu, Hoboken, N.J.: John Wiley & Sons, 2016.
“The Book in a Nutshell,” pages xiii – xxiii, Chapter One (“Corporate Reporting Then and Now: A Century of ‘Progress’,” pages 1 – 13.
Authors argue that “financial disclosure has lost its effectiveness” and proposes an agenda to expand the information investors and lenders need to assess the performance and potential of business enterprises.


Winning Investors Over
Lev, Cambridge, Mass.: Harvard Business Press, 2012.
Chapter Seven (“Life Beyond GAAP”), pages 145-171.
Discusses the differences between GAAP and non-GAAP or “pro forma” earnings (EBITDA, for example). “Research clearly corroborates the usefulness of pro forma numbers to investors. It indicates, for example, that pro forma earnings have a stronger association than GAAP earnings with stock returns and with revisions of analysts’ earnings forecasts—and that they are better predictors of future profits.”


“Fear, Greed, and Financial Crises: A Cognitive Neurosciences Perspective.”
Andrew W. Lo, October 13, 2011
“One of the most significant consequences of the Financial Crisis of 2007–2009 is the realization that the intellectual framework of economics and finance is incomplete in several respects.”


“Fear as a Motivation to Commit Management Fraud: A Conceptual Paper Regarding Ethics and Executive Accounting.”
Frank Lombardo, September 10, 2015
"Fear matters in driving individuals to commit financial statement frauds, fear of the loss of reputation and status a primary motivator. These findings deepen the components of the fraud triangle."


“Corporate Fraud Prevention and Detection: Revisiting the Literature.”
Deepa Mangala, Journal of Commerce & Accounting Research, Volume 4, Issue 1, January 2015, pp 35-45.


“Companies Purposely Hire Fraudsters: Study.”
David McCann, August 19, 2015.
Working Paper, University of South Carolina. Presented at the American Accounting Association Annual Meeting, August 2015.
“Groundbreaking research suggests that when hiring accountants, companies weigh a proclivity toward ‘earnings management’ more highly than any other trait.” See: Scott Jackson, Ling Harris, and Joel Owens, “Earnings Management and Employee Selection.” 


"I've Got Your Number."
Mark J. Nigrini, Journal of Accountancy, May 1999.
Nigrini: “Benford's law is used to determine the normal level of number duplication in data sets, which in turn makes it possible to identify abnormal digit and number occurrence. Accountants and auditors have begun to apply Benford's law to corporate data to discover number-pattern anomalies.”

For more information on Benford’s law, see: Robert Matthews, “The Power of One.” New Scientist. July 10, 1999. Pages 26-30.)


“A Review of Financial Accounting Fraud Detection Based on Data Mining Techniques.”
Prabin Kumar Panigrah and Anuj Sharma. International Journal of Computer Applications Vol. 39, No. 1 (February 2012).

“On Financial Frauds and Their Causes: Investor Overconfidence.”
Steven Pressman, American Journal of Economics and Sociology. Vol. 57, No. 4 (October 1998), pages 405-421
Pressman rebuts the classical economic view that investors are rationale and the neoclassical view that investors are at a disadvantage with their asymmetric information. Instead, he argues that investors focus on certain facts, such as the massive early gains of the first investors, to make their decisions. “Empirical psychology provides a good deal of evidence that people are psychologically constituted to make the very sorts of errors that lead to cases of massive financial fraud. “One result from the empirical psychology literature is that judgments about potential risk are frequently mistaken, and human fallibility tends to be greatest when people hold their faulty judgments with great confidence [Slovic, Fischhoff, and Lichtenstein, 1982]. Moreover, people are psychologically predisposed to be optimistic whenever they are individually involved and have had no bad personal experiences from their past to counter this innate optimism. For example, a large majority of people think that they will live past 80 [Weinstein, 1980] and that they, personally, are unlikely to be harmed by products they buy and use [Rethans, 1979]. Psychologically, people tend to live in the world of Lake Wobegon, where all children are smarter than average and better behaved than average.”)


Financial Statement Fraud. Prevention and Detection
Zabihollah Rezaee and Richard Riley. Second Edition. New York: Wiley, 2010.
Part One, pages 1- 55.
Covers similar ground as Schilit/Perler with different examples.


The Signal and the Noise: Why So Many Predictions Fail — but Some Don't
Nate Silver, Penguin Press, 2012.
“Introduction,” Chapter One: “A Catastrophic Failure of Prediction,” pages 1 – 46; and Chapter 11: “If You Can’t Beat ‘Em…”, pages 329 – 369.
Failing to predict the financial crisis demonstrates common failures of prediction, one key one being that models are “simplifications of the world.” Further, “To the extent that markets are reflections of our collective judgment, they are fallible too. In fact, a market that makes perfect predictions is a logical impossibility.”


“Detecting and Predicting Financial Statement Fraud: The Effectiveness of the Fraud Triangle and SAS No. 99.”
Christopher J. Skousen, Kevin R. Smith, and Charlotte J. Wright, October 28, 2008
“We find that rapid asset growth, increased cash needs and external financing are positively related to the likelihood of fraud. Internal versus external ownership of shares and control of the board of directors are also linked to increased incidence of financial statement fraud. Expansion in the number of independent members on the audit committee, on the other hand, is negatively related to the occurrence of fraud.”


The Quest for Value
G. Bennett Steward, III, New York: Harper Business, 1991.
Chapter One (“Introduction”), pages 1-18; Chapter Two (“Market Myths”), pages 21-67
"To satisfy Wall street’s alleged craving for reported profits, many top managers feel compelled to conjure up earnings through time-consuming and ethics-corroding accounting legerdemains.”


Business Cycles: Theory, History, Indicators and Forecasting
Victor Zarnowitz, Chicago: University of Chicago Press, 1992.
Chapter One, “Macroeconomics and Business Cycles: An Overview,” pages 1 – 19
"Does fraud most likely occur during the period up to and including a boom? A chapter from this book looks at the dynamics of business cycles and their influence on corporate and investor behavior."

Financial Frauds in the 17th and 18th Centuries – Similarities and Differences Between the English Stock Market Boom (1690s), the Mississippi Bubble (1719-1720), the South Sea Bubble (1720), and Railroad Booms and Busts in the U.K. (1843 – 1845)




The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble
Anne L. Murphy, Cambridge, U.K.: Cambridge University Press, 2012
“Introduction.” Chapter 1 (“London’s First Stock Market Boom”).


Devil Take the Hindmost
Chapter 1 (“This Bubble World”), pages 3-29. Chapter 2 (“Stockjobbing in ‘Change Alley: The Projecting Age of the 1690s”), pages 30-57. Chapter 3 (“The South Sea Scheme”), pages 58-95


Manias, Panics, and Crashes
Charles P. Kindleberger and Robert Aliber, New York: Wiley, 2005, pages 58 – 61


Millionaire: The Philanderer, Gambler, and Duelist Who Invented Modern Finance
[About John Law]Janet Gleeson, New York: Simon and Schuster, 2001
Chapters 8 (“The Bank”) to 13 (“Descent”).





The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims
Tamar Frankel, Oxford University Press, 2012.
Chapter 4 (“A Profile of Con Artists and Their Victims”), pages 110 – 159



“The Museum of Art and Finance, Gallery 1: Tulipmania.”
Jason Zweig


1690s Stock Frauds in England

The Origins of English Financial Markets: Investment and Speculation before the South Sea Bubble.
Anne Murphy


The Extravagant Humour of the English Body Politic, 1690-1720.
Matthew David Mitchell, Essays in Economic and Business History. Vol. XXX (2012)
Insights into the political debate over the merits of “stockjobbing”


Casualties of Credit: The English Financial Revolution, 1620-1720
Carl Wennerlind, Cambridge, Mass.: Harvard University Press, 2011
The need to expand credit dominated much of the thinking about the economy in England from the 1620s onward.


John Law

“The Ascent of Money.”
Niall Ferguson
Episode Two: Bonds of War


“New Evidence on the First Financial Bubble.”
Rik G. P. Frehen, William N. Goetzmann, and K. Geert Rouwenhorst. Yale ICF Working Paper No. 09-04
“We find evidence against indiscriminate irrational exuberance and evidence in favor of speculation about two factors: the Atlantic trade and the incorporation of insurance companies. We study the role of innovation in the insurance market by examining market betas and volatilities of new insurance company shares, like [Pastor and Veronesi, Technological Revolutions and Stock Prices, 2009]. We find strong evidence for a revolution in the insurance business in 1720. Our findings are consistent with the hypothesis that financial bubbles require a plausible story to justify investor optimism.”


“The Evolution of John Law’s Theories and Policies 1707 – 1715,”.
Antoin E. Murphy, European Economic Review 34 (1991): 1109-1125
The writer surveys Law’s views supporting paper money, rather than precious metals, broadening the definition of money to include financial instruments, and linking monetary and fiscal policies.


Economic Theorist and Policy-Maker.
Antoin E. Murphy, Oxford: Clarendon Press, 1997.


“John Law and the Mississippi Bubble: 1718-1720.”
Jon Moen


"I Am Not Master of Events": The Speculations of John Law and Lord Londonderry in the Mississippi and South Sea Bubbles.
Larry Neal, Yale Series in Economic and Financial History. New Haven, CT: Yale University Press, 2012

“Famous First Bubbles? Mississippi Bubble.”
Dave Smant, Erasmus School of Economics.


“Was John Law’s System a Bubble? The Mississippi Bubble Revisited.” The Origin and Development of Financial Markets and Institutions: From the Seventeenth Century to the Present
François R. Velde, Cambridge University Press, 2009,pages 99-120.


Gregor MacGregor


“The King of Con-men”
Economist. December 22, 2012.


The Land That Never Was: Sir Gregor MacGregor and the Land that Never Was: The Most Audacious Fraud in History
David Sinclair. New York: Da Capo Press, 2003.


South Sea Company


The South Sea Bubble.
John Carswell, London: Cresset Press, 1960.


The Great Swindle: The Story of the South Sea Bubble.
Virginia Cowles, New York: Harper & Brothers, 1960.


“The Myths of the South Sea Bubble.”
Julian Hoppitt, Transactions of the Royal Historical Society. 2002: 12.


“Complete Histories – The South Seas Company – The Forgotten ETF.”
Ralph M. Dillon, September 5, 2013
The South Sea Company was one of the first exchange-traded funds and a debt-equity swap.


“The Folly of Particulars’: the Political Economy of the South Sea Bubble.”
Richard Kleer, Financial History Review 19-2 (2012): 175-197.
The author argues that South Sea Company’s agreeing in 1720 to convert a large part of the public debt into shares was seen as “an opportunity to establish dominance in the British banking industry.”


”Financial Market Analysis Can Go Mad (in the Search for Irrational Behavior During the South Sea Bubble.”
Gary S. Shea, February 2006. Centre for Dynamic Macroeconomic Analysis Working Paper No. 0508.
“An investigation into the legal and political history of South Sea Company subscription finance shows that the subscription contracts had default options built into them, as was typically the case in eighteenth-century subscription financing. Company records and contemporary pamphlet literature show that people understood the subscription finance mechanics that were stated in law. A fair presentation of South Sea share value data also supports this view. We thus conclude that the analyses published in this review by Dale, Johnson, and Tang were irretrievably flawed and present a substantially incorrect history of the markets for South Sea shares.”


"Understanding Financial Derivatives during the South Sea Bubble: The Case of the South Sea Subscription Shares."
Gary S. Shea, 2007. Oxford Economic Papers 59 (Supplement 1): 73-104.
“South Sea Company subscription shares were compound call options on the firm’s own original shares. From the description of shares found in 6 Geo. 1, c.4, a theory of their pricing is developed. A method for computing subscription share values is also developed. Calculated theoretical values for subscription shares are compared to the shares’ historical values and a close correspondence between the two is demonstrated. The pricing of the subscriptions appears to have been quite rational and explainable using simple financial economic theory.”


The South Sea Company: An Historical Essay and Bibliographical Finding List
John G. Sperling


“Sunk in Lucre’s Sordid Charms.” South Sea Bubble resources in the Kress Collection of Baker Library

Crédit Mobilier (1870s), Ponzi and the “Match King”

Required Reading


Devil Take the Hindmost
Chancellor, Chapter 5 (“ ‘A Ready Communication:’ The Railroad Mania of 1845”), pages 122-151

The Match King: Ivar Kreuger. The Financial Genius behind a Century of Wall Street Scandals
Frank Partnoy, New York: Public Affairs, 2008

Ponzi's Scheme: The True Story of a Financial Legend
Mitchell Zuckoff, New York: Random House, 2006, Chapters 11 (“Like Stealing Candy from a Baby”) and 12 (“Money Madness”)



Recommended Reading


U.K. Railroads

“The Railway Mania: Not So Great Expectations?”
Gareth Campbell, May 23, 2009


“Bubbling Dividends.”
Gareth Campbell, MPRA Paper No. 29840. June 30, 2010
He argues: “Although this period was a bubble in the popular sense of the word, in that there was a substantial asset price reversal, it was not a bubble in the economic sense, as railway shares were not obviously mispriced at the market peak. Prices of railway shares rose by an average of 106% between 1843 and 1845, but the market then crashed, and during a prolonged decline, railway shares fell back below their original value. However, a similar rise and fall also occurred in the dividends paid by the railways. There is evidence that the railways were priced consistently with non-railways throughout the period, given the short-term dividend growth which they were experiencing, and it would have been difficult for anyone to have predicted the extent of the asset price falls that eventually transpired.”


“The Media in a Mania: Newspaper Coverage of the British Railway Mania.”
Gareth Campbell, John D. Turner, and Clive B. Walker, Explorations in Economic History. Volume: 49 (2012) Issue: 4 (Pages: 461-481.)
Paper examines the “news media during one of the largest asset price reversals in history, namely the British Railway Mania. Using textual analysis, we find that the nature of news media commentary on the railway market and industry did not affect the market for railway stock. We also find that the negative editorials of the Times and Economist had little impact on the market. Finally, the amount of coverage received by individual railway companies did not affect the performance of their stocks. Overall, our findings suggest that the news media did not contribute to the asset price reversal.”


“The Greatest Bubble in History. Stock Prices during the British Railway Mania.”
Gareth Campbell and John D. Turner, Queen’s University Management School Working Paper Series MS_WPS_FIN_10_1, April 2010.,260350,en.pdf
“The rapid decline in the dividends paid by railway firms during the downturn suggests that changes in cash flows may have been influential in the price falls.”


Facts, Failures and Frauds: Revelations, Financial Mercantile, Criminal
David Morier Evans. Originally published in 1859. Nabu Press reprint 2010.
Chapter 1 (“ ’High Art’ Crime – Its Inauguration, Development, and Rapid Progress”) and Chapter 2 (“The Rise and Fall of Mr. George Hudson, M.P.”).


Railway Economy: A Treatise on the New Art of Transport, its Management, Prospects, and Relations, Commercial, Financial, and Social.
Dionysius Lardner, London: Harper & Brothers, 1850.
“A contemporary writer on railways, Dionysius Lardner, observed that for the new projects to have been profitable the number of passengers carried on the railways would have had to increase five-fold. Mr. Lardner’s observation was both fairly obvious and accurate. But no one listened to him. Instead, the mania ran its course. Railway stocks shed two-thirds of their value after 1845, with the index of shares ending up below where it had been before the first mania commenced in 1835. Railway shareholders, including the Brontë sisters and Charles Darwin, suffered painfully.”


“Bubbles: A Victorian Lesson in Mania”
Ed Chancellor, Financial Times, April 11, 2010


“This Time is Different: An Example of a Giant, Wildly Speculative, and Successful Investment Mania.”
Andrew Odlyzko, June 21, 2010.
“The railway mania of the 1830s serves as useful antidote to claims that bubbles are easy to detect or that all large and quick jumps in asset valuations are irrational.”


“Collective Hallucinations and Inefficient Markets: The British Railway Mania of the 1840s.”
Andrew Odlyzko, January 15, 2010.
“There were trustworthy quantitative measures to show investors [who included Charles Darwin, John Stuart Mill, and the Brontë sisters] that there would not be enough demand for railway transport to provide the expected revenues and profits. But the power of the revolutionary new technology, assisted by artful manipulation of public perception by interested parties, induced a collective hallucination that made investors ignore such considerations. They persisted in ignoring them for several years, until the lines were placed in service and the inevitable disaster struck.”


For readings on the accounting debate involving John Hudson’s railroads:
“Financial Reporting in the Context of Crisis: Reconsidering the Impact of the 'Mania' on Early Railway Accounting.”
S. McCartney and A.J. Arnold, European Accounting Review, Vol. 11 (2002), pp. 401-417.

"The Railway Mania of 1845-1847: Market Irrationality or Collusive Swindle Based on Accounting Distortions?"
S. McCartney and A.J. Arnold. (2003), Accounting, Auditing and Accountability Journal, Vol. 16 (2003): 5, pp. 821 – 852.


Crédit Mobilier

Behind the Scenes in Washington: A Complete and Graphic Account of the Crédit Mobilier Investigation
Edward Winslow Martin, New York: The Continental Publishing Company and National Publishing Co., 1873.


"Durant's Big Scam."
James Surowiecki, New Yorker, January 2003.


The Gilded Age.
Mark Twain
1873 novel satirizes greed and political corruption in post-Civil War America.


U.S. Congress. Crédit Mobilier. Reports of Committees. Hard Press, May 2008:
Crédit Mobilier: Report of the Selection Committee of the House of Representatives Appointed under the Resolution of January 6, 1873, to Make Inquiry in Relation to the Affairs of the Union Pacific Railroad Company, the Crédit Mobilier of America, and other Matters Specified in Said Resolution and in Other Resolutions Referred to Said Committee.
U.S. House of Representatives, Washington, D.C.: Government Printing Office, 1873


“The Expulsion Case of James W. Patterson of New Hampshire (1873) (Crédit Mobilier Scandal), U.S. Senate


The Ponzi Scheme Puzzle: A History and Analysis of Con Artists and Victims
Tamar Frankel, New York: Oxford University Press, 2012.


Kreuger, Genius and Swindler
Robert Shaplen, New York: Knopf, 1960.

The Life And Death Of Ivar Kreuger
William H. Stoneman, Indianapolis: The Bobbs-Merrill Company, 1932


Empire Express: Building the First Transcontinental Railroad
VIDEO: CSPAN Booknotes, David Haward Bain discusses his book

Shameless Chicanery and Wall Street’s “Hellhound;” The 60s/70s: The “Go-Go-Years;” The 80s: Junk Bonds/Drexel/Milken, Savings and Loan Crisis


Required Reading


Once in Golconda: A True Drama of Wall Street 1920-1928John Brooks

New York: Wiley, 1999

The New Yorker writer portrays the character and peccadilloes of financier Richard Whitney, a Morgan broker who headed the New York Stock Exchange, but ended up in Sing Sing Prison for his misdeeds. (Golconda – source of wealth; derived from diamond mine in India) Read the entire book.

The Go-Go Years. The Drama and Crushing Finale of Wall Street’s Bullish ‘60sJohn Brooks

New York: Wiley, 1973

Read the entire book

Devil Take the HindmostChancellor

Chapter 7 (“The End of a New Era: The Crash of 1929 and Its Aftermath”), pages 191-232. Chapter 8 (“Cowboy Capitalism: From Bretton Woods to Michael Milken”), pages 233-282

Manias, Panics, and CrashesKindleberger

“Instability of Credit and the Great Depression,” pages 83-89; “International Ramifications,” pages 138-40; and, Chapter 11 (“Domestic Lender of Last Resort”), pages 225-242.

The Hellhound of Wall StreetMichael Perino

New York: Penguin Press, 2010

“Part Two,” pages 129-279; “Epilogue,” pages 280-304

The Best Way to Rob a Bank Is to Own One: How Corporate Executives and Politicians Looted the S&L IndustryWilliam K. Black

Austin, Texas: University of Texas Press, 2005

Chapter 2 (“Competition Laxity”) and Chapter 10 (“It’s the Things You Do Know, But Aren’t So, That Cause Disasters”).

“The Death of Equities. How Inflation is Destroying the Stock Market.”

Business Week, August 13, 1979




Recommended Reading


The Great Bull Market: Wall Street in the 1920s.
Robert Sobel, New York: Norton, 1968. 


The Great Crash 1929.
John Kenneth Galbraith, New York: Houghton Mifflin, 1954.


“Shorting Restrictions: Revisiting the 1930’s.”
Charles M. Jones, The Financial Review 47 (2012): 1–35.
“Market participants must have driven up prices thinking that restrictions on short sellers would make it more difficult for prices to impound their pessimistic beliefs…. Regulation can improve liquidity by constraining a certain class of market participants. However, this comes at some cost to the constrained parties…. One of the main problems is that it is hard to quantify the costs and benefits…. As events have unfolded, the economic justifications seem less and less likely.”


The Pecora Report.
The 1934 Report on the Practices of Stock Exchanges from the “Pecora Commission.” Chapter 2 (“Investment Banking Practices”), pages 83-153, and Chapter 3 (“Commercial Banking Practices”), pages 155-229.


Pecora Investigation Hearings
(also known as Stock Exchange Practices. Hearings before the Committee on Banking and Currency Pursuant to S.Res. 84, S.Res. 56, and S.Res. 97).


“A History of Pooling of Interests Accounting for Business Combinations in the United States.”
Frank R. Rayburn and Ollie S. Powers, Accounting Historians Journal, Vol. 18, No. 2.
Traces accounting reforms Accounting Principles Board Opinion Nos. 16 and 17.


Selling America Short. The SEC and Market Contrarians in the Age of Absurdity
Richard C. Sauer, New York: John Wiley & Sons, 2010.
Chapter 1 (“Theft by Deception: Control Fraud in S&L”); Chapter 2 (“Competition in Laxity”); and, Chapter 11 (“It’s The Things You Do Know, But Aren’t So, That Cause Disasters”)

90s “Boiler Rooms;” Lessons from Enron, WorldCom, Tyco, etc.: Finding the “Dogs” behind Financial Statements’ “Ducks”


“Don't Ask, Don't Tell: Bernie Madoff Attracts Skeptics in 2001.”
Erin E. Arvedlund, Barron’s, May 7, 2001.


Bull: A History of the Boom and Bust
Maggie Mahar, 1982-2004. New York: Harper, 2004.
Chapter 3 (“The Stage Is Set, 1961-81”), pages 35-47; Chapter 4 (“The Curtain Rises, 1982-87”), pages 48-60; and Chapter 5 (“Black Monday, 1987-89”), pages 61-77.


The Truth about Corporate Accounting
Abraham J. Briloff, New York: Harper Collins, 1981.


Unaccountable Accounting
Abraham J. Briloff, New York: Harper & Row, 1972.


“WorldCom warns, splits in two.”
CNN, November 1, 2000.


FDIC, The S&L Crisis: A Chrono-Bibliography


“Drexel Burnham Lambert's legacy: Stars of the Junkyard.”
Economist, October 21, 2010
“Twenty years after Michael Milken’s junk-bond firm came crashing down, the financial revolution that it fostered lives on.”


Minding Mister Market: Ten Years on Wall Street with Grant's Interest Rate Observer
James Grant, New York: Three Rivers Press, 1994.
“A Thrift for Our Time”, pages 128-134; “Part Six: Adventures in Leverage,” pages 237 – 287


“Say Good-Bye to Pooling and Goodwill Amortization. Will FASB’s new standards for business combinations cause big changes?”
Stephen R. Moehrle and Jennifer A. Reynolds-Moehrle, Journal of Accountancy, September 2001.


“Junk Bonds: How High Yield Securities Restructured Corporate America.”
Glenn Yago, New York: Oxford University Press, 1991.
“Far from being the scourge of the capital markets or a ‘betrayal of capitalism,’ junk bonds have been associated with rapid growth in sales, productivity, employment, and capital spending. High yield firms have consistently outpaced their industries in these and other key performance areas.”


Oliver Stone, “Wall Street.” 1987. A young and impatient stockbroker is willing to do anything to get to the top, including trading on illegal inside information taken through a ruthless and greedy corporate raider who takes the youth under his wing.
“The Boiler Room.” 2000. Based on interviews of those working for Stratton Oakmont and other “pump and dump” securities firms, the film shows how brokers created artificial demand in stocks of fake or bankrupt companies.
Martin Scorsese, “The Wolf of Wall Street.” 2013. Based on the memoires of Jordan Belfort, the founder of the boiler room Stratton Oakmont.


“Why Dow 36,000 is Probably a Fantasy.”
Business Week, September 17, 1999.

“Dow 36,000.”
James Glassman and Kevin A. Hasset, The Atlantic. September 1999.
“Stocks were undervalued in the 1980s and early 1990s, and they are undervalued now. Stock prices could double, triple, or even quadruple tomorrow and still not be too high.”


Dot.Con: The Greatest Story Ever Sold
John Cassidy, New York: HarperCollins, 2002.
Chapter 1 (“Popular Capitalism”), pages 25-36. Chapter 2 (“New Economy”), pages 150-165. Chapter 20 (“Crash”), pages 279-294. Chapter 21 (“Dead Dotcom”), pages 295-312


“What Caused Enron?: A Capsule Social and Economic History of the 1990's.”
John C. Coffee, Columbia Law and Economics Working Paper No. 214
“Between January 1997 and June 2002, approximately 10% of all listed companies in the United States announced at least one financial statement restatement. The stock prices of restating companies declined 10% on average on the announcement of these restatements, with restating firms losing over $100 billion in market capitalization over a short three-day trading window surrounding these restatements.” Coffee outlines several plausible explanatory narratives: the “gatekeeper story” in which the auditors, analysts, debt-rating agencies, and regulators failed, failures which Sarbanes-Oxley was intended to address; the “misaligned incentives story” that shows how a shift to equity-based compensation incented management to inflate earnings and create short-term price spikes; and, the “herding story,” in which incentives force investors to focus on quarterly performance and “ride the bubble.”


“Bubble Trouble: And What Policymakers Should Do about It.”
Economist, May 16, 2002.


Origins of the Crash
Roger Lowenstein, New York: Penguin, 2004.
Chapter 1 (“Origins of a Culture”), pages 1 – 14. Chapter 10 (“Epilogue”), pages 217-227


"How is Tyco Accounting for Its Cash Flow?"
Mark Maremont, Wall Street Journal, March 5, 2002.


Taking Down the Lion
Catherine S. Neal, New York: Palgrave Macmillan, 2013.
"Kozlowski is a better person than the guy portrayed in the media for the past eleven years. We must remember that not everything we read is accurate. Sometimes, things are written simply to sell more newspapers or to get more online hits. Perhaps it's time to give Dennis Kozlowski a break — allow him to rebuild his life without any further public castigation, name-calling, and mischaracterizations.” A group of "hunters," led by veteran Manhattan district attorney Robert Morgenthau, set out to take down Kozlowski — "the lion," she writes. “Throughout,” writes FT Management Editor Andrew Hill in a review, “she points the finger at almost everyone other than Kozlowski.”


“Does the Sarbanes-Oxley Act Have a Future?”
Roberta Romano, May 14, 2009. Yale Law and Economics Research Paper No. 385
“Although the enactment of the Sarbanes-Oxley Act (SOX) received nearly unanimous congressional support, only a few years thereafter its wisdom was increasingly questioned and its supporters had to stave off attempts to redraft the legislation. The financial crisis of 2008 has sidelined efforts to alter the legislation’s most costly provision, as Congress’s attention has turned to overhauling the regulatory regime for financial institutions. There is, nonetheless, much to be learned about financial regulation and SOX’s future, from an in-depth examination of the interplay of the government and private commissions created with an eye to revising the legislation, media coverage of those entities, and congressional responses. That interaction provides a map of political fault lines and assists in forecasting the prospects for redrafting SOX’s most costly provision. It also serves as a cautionary tale regarding significant regulation enacted in the midst of a financial market crisis. The ongoing financial crisis has sidelined SOX, but its burdensome costs suggest that it might well, in due course, reemerge on the legislative agenda.”


Financial Statement Fraud: Prevention and Detection
Razaee/Riley, 2010. Enron & WorldCom.


“What Tyco Tells Us.”
M. Useem, Wall Street Journal, June 5, 2002.


Film: “The Smartest Guys in the Room.” 2005 documentary based on the book of the same name. Available on reserve at the Yale Film Study Center, 53 Wall Street, Room B17.


“2013 A Transactional Genealogy of Scandal: From Michael Milken to Enron to Goldman Sachs.”
William W. Bratton and Adam J. Levitin
“This article highlights a previously unnoticed transactional affinity tying these scandals together—a deal structure known as the synthetic collateralized debt obligation involving the use of a special purpose entity (SPE).”

The Implosion; The Great Collapse 2007-2009: Financial Detectives’ Epic Battles for the Truth. Were We All to Blame but No One Was at Fault? Too Big to Fail and Jail?


The Bankers’ New Clothes: What’s Wrong with Banking and What to Do About It
Princeton: Princeton University Press, 2013.
Argues that banks operate with vastly insufficient levels of equity capital relative to their assets.


“It Takes a Village to Maintain a Dangerous Financial System.”
Anat R. Admati, May 2016
“Reassurances that regulators are doing their best to protect the public are false. The underlying problem is a powerful mix of distorted incentives, ignorance, confusion, and lack of accountability. Willful blindness seems to play a role in flawed claims by the system’s enablers that obscure reality and muddle the policy debate.”


“Bank Failure, ‘Mark-to-Market and the Financial Crisis.’ ”
Amir Amel-Zadeh and G. Meeks, November 1, 2011.
“Two of the most prominent bank failures cannot, at first sight, be attributed to fair value accounting: we show that Northern Rock was balance sheet solvent, even on a fair value basis, as was Lehman Brothers. The anecdotal evidence is augmented by empirical tests that suggest that daily mark-to-market risk does not increase the perceived bankruptcy risk of banks which is rather explained by constraints in the interbank lending market. Moreover, we do not find evidence that fair value accounting introduced pro-cyclical bank balance sheets or market externalities.”


“The Fed and Lehman Brothers: Introduction and Summary.”
Laurence Ball, NBER Working Paper No. 22410.
“Why did the Federal Reserve let Lehman Brothers fail? Fed officials say they lacked the legal authority to rescue the firm, because it did not have adequate collateral to borrow the cash it needed. This paper summarizes a monograph that disputes officials’ claims (Ball, 2016). These claims are incorrect in two senses: a perceived lack of legal authority was not why the Fed did not rescue Lehman; and the Fed did in fact have the authority for a rescue.” Ball criticizes the policymakers for failing to examine the adequacy of Lehman’s collateral in their deliberations before the bankruptcy.


Basel Committee on Banking Supervision, “The interplay of accounting and regulation and its impact on bank behaviour: Literature review.”
Working Paper 28. January 2015


“Short-Selling Bans and Bank Stability
Alessandro Beber, Daniela Fabbri, and Marco Pagano, January 24, 2016
“In both the 2008-09 subprime crisis and the 2011-12 euro debt crisis, security regulators imposed bans on short sales, designed mainly with financial institutions in mind. The motivation was that a collapse in a bank’s stock price could lead to funding problems, triggering further price drops: the ban on shorting bank stocks was supposed to break this loop, stabilizing banks and bolstering their solvency. We test this hypothesis against evidence from both crises, estimating panel data regressions for 13,473 stocks in 2008 and 16,424 stocks in 2011 in 25 countries, taking the endogeneity of short-selling bans into account. Contrary to the regulators’ intentions, in neither crisis were the bans associated with increased bank stability. Instead, when financial institutions were subjected to a short-selling ban, they displayed larger share price drops, greater return volatility and higher probability of default. And the effects were more pronounced for the more vulnerable banks. Nor did the ban in 2011 do anything to mitigate the ‘diabolic loop’ between bank and sovereign insolvency risk during the euro-area sovereign debt crisis.”


The Courage to Act
Ben Bernanke, New York: W. W. Norton & Co., 2015


“Corporate Psychopaths Theory of the Global Financial Crisis."
Clive R. Boddy, Journal of Business Ethics (2011) 102:255–259
Column by: William D. Cohan, “Did Psychopaths Take Over Wall Street Asylum?”
“This short theoretical paper elucidates a plausible theory about the Global Financial Crisis and the role of senior financial corporate directors in that crisis. The paper presents a theory of the Global Financial Crisis which argues that psychopaths working in corporations and in financial corporations, in particular, have had a major part in causing the crisis.


“The Financial Cycle and Macroeconomics: What Have We Learnt?”
Claudio Borio, BIS Working Paper No. 395. December 2012


“The Volcker Rule: Obama’s Economic Adviser and His Battles over the Financial-Reform Bill.”
John Cassidy, New Yorker, July 26, 2010


Money and Power. How Goldman Sachs Came to Rule the World
William D. Cohan, New York: Doubleday, 2011.


Models Behaving Badly: Why Confusing Illusion with Reality Can Lead to Disaster on Wall Street and in Life
Emanuel Derman, New York: Free Press, 2011.


“Special report: Europe and its currency. Staring into the abyss.”
Economist, November 12, 2011.


Fooling Some of the People All of the Time
David Einhorn, New York: John Wiley & Sons, 2011.
Chapters 5 (“Dissecting Allied Capital”), 6 (“Allied Talks Back”), 8 (“You Have to Be Kidding Me Method of Accounting”), and 35 (“Looking Back As the Story Continued”).


“For One Whistle-Blower, No Good Deed Goes Unpunished.”
Jesse Eisinger, ProPublica, June 1, 2011.


“Fiscal Crises and Imperial Collapses: Historical Perspective on Current Predicaments.”
Niall Ferguson, May 13, 2010.


Law, Bubbles, and Financial Regulation.
Erik F. Gerding, New York: Routledge, 2014
Chapter One (“The Regulatory Instability Hypothesis”). 
He “outlines how financial regulation can fail when it is needed the most. The dynamics of asset price bubbles weaken financial regulation just as financial markets begin to overheat and the risk of crisis spikes. At the same time, the failure of financial regulations adds further fuel to a bubble.”


Misunderstanding Financial Crises: Why We Don’t See Them Coming
Gary B. Gorton, New York: Oxford University Press, 2012


“Did Fair-Value Accounting Contribute to the Financial Crisis?”
Christian Laux and Christian Leuz, October 12, 2009.
Chicago Booth Research Paper 09-38; ECGI - Finance Working Paper No. 266/2009; Journal of Economic Perspectives, Forthcoming.
“Many critics have argued that fair-value accounting, often also called mark-to-market accounting, has significantly contributed to the financial crisis or, at least, exacerbated its severity. In this paper, we assess these arguments and examine the role of fair-value accounting in the financial crisis using descriptive data and empirical evidence. Based on our analysis, it is unlikely that fair-value accounting added to the severity of the 2008 financial crisis in a major way. While there may have been downward spirals or asset-fire sales in certain markets, we find little evidence that these effects are the result of fair-value accounting. We also find little support for claims that fair-value accounting leads to excessive write-downs of banks’ assets. If anything, empirical evidence to date points in the opposite direction, that is, towards overvaluation of bank assets.”


“The Governance of Financial regulation: Reform Lessons from the Recent Crisis.”
Ross Levine, Bank for International Settlement Working Paper No. 329. November 2010
“There was a systemic failure of financial regulation: senior policymakers repeatedly enacted and implemented policies that destabilized the global financial system. . . . The crisis does not primarily reflect an absence of regulatory power, unclear lines of regulatory authority, capital account imbalances, or a lack of information by regulators. Rather, it represents the unwillingness of the policy apparatus to adapt to a dynamic, innovating financial system.”


The Big Short
Michael Lewis, New York: Norton, 2010


“The End of the Financial World as We Know It”
Michael Lewis and David Einhorn, New York Times, January 3, 2009. .


“Reading About the Financial Crisis: A 21-Book Review.”
Andrew Lo, October 26, 2011.
He told NPR, "After each book, I felt like I knew less.”


Bust: Greece, the Euro and the Sovereign Debt Crisis
Matthew Lynn, New York: Bloomberg Press, 2010.
Chapter 5 (“Fixing a Debt Crisis with Debt”), pages 93-110. Chapter 6 (“Burying Your Head in Greek Sand”), pages 111-126. Chapter 7 (“The Debts Fall Due”), pages 127-148.


The End of Wall Street
Roger Lowenstein, New York: Penguin Press, 2010.


Bull! A History of the Boom
Maggie Mahar
Chapter 21 (“Looking Ahead: What 353 Financial Cycles Mean for the 21st Century Investor”), pages 353-384


Reckless Endangerment: How Outsized Ambition, Greed, and Corruption Led to the Economic Armageddon
Gretchen Morgenson and Joshua Rosner, New York: Times Books, 2011.


Zombie Banks: How Broken Banks And Debtor Nations Are Crippling the Global Economy
Yalman Onaran, New York: Bloomberg Press, 2012.


Ship of Fools. How Stupidity and Corruption Sank the Celtic Tiger
Fintan O’Toole, New York: Public Affairs, 2010
Chapter 8 (“Unknown Knows”), pages 168-192. “Epilogue, The Second Republic,” pages 214-226


“Playing with Fire: Special Report: Financial Innovation.”
Andrew Palmer, The Economist, February 25, 2012.


“What’s Inside America’s Banks?”
Frank Partnoy and Jesse Eisenger, The Atlantic, January-February 2013
“Sophisticated investors describe big banks as ‘black boxes’ that may still be concealing enormous risks—the sort that could again take down the economy. A close investigation of a supposedly conservative bank’s financial records uncovers the reason for these fears—and points the way toward urgent reforms.”


PBS Frontline, “The Untouchables.”
Broadcast January 22, 2013
Examines why no Wall Street executives have been prosecuted for the financial crisis
In particular, see the interview segment with Lanny Breuer, former assistant attorney general for the Department of Justice’s Criminal Division. The documentary shows how the Administration stressed the need to bolster confidence rather than prosecuting fraud.


“Why Prudential Regulation Will Fail to Prevent Financial Crises: A Legal Approach.”
Marcelo Madureira Prates, November 2013.


“The Sustainability of Pension Schemes.”
Srichander Ramaswamy, Bank for International Settlement Working Paper No 368. January 2012.


This Time Is Different: Eight Centuries of Financial Folly
Carmen M. Reinhart and Kenneth Rogoff, Princeton: Princeton University Press, 2011.
Part One (“Financial Crises: An Operational Primer”), Part Five (“The U.S. Subprime and the Second Great Contraction”)


“This Time is Different, Again? The United States Five Years after the Onset of Subprime.”
Carmen M. Reinhart and Kenneth S. Rogoff, October 14, 2012.
Updates data from their book and challenges those who stress that the United States is “different” in recovering from a financial question, particularly such “interpretations” of historical data.


“The Liquidation of Government Debt.”
Carmen M. Reinhart and M. Belen Sbrancia, NBER Working Paper 16893.
“A subtle type of debt restructuring takes the form of ‘financial repression.’ Financial repression includes directed lending to government by captive domestic audiences (such as pension funds), explicit or implicit caps on interest rates, regulation of cross-border capital movements, and (generally) a tighter connection between government and banks.”


The Confidence Game. How Hedge Fund Manager Bill Ackman Called Wall Street's Bluff
Christine S. Richard, New York: Bloomberg Press, 2011.
Chapter 2 (“The Short Seller”), pages 9-24. Chapter 24 (“Judgment Day”), pages 271-280. Chapter 25 (“Nuclear Threat”), pages 281-291. “Epilogue”, pages 293-300


“Lehman Failed Lending to Itself in Alchemy Eluding Dodd-Frank.”
Christine Richard and Bob Ivry, Bloomberg, March 11, 2011.
Reporters argue that the $3 billion in loans Lehman Brothers Holdings Inc. made to itself would today still “elude the Dodd-Frank law designed to prevent such financial alchemy.”


Charlie Rose Show, December 6, 2009, David Einhorn on Lehman Brothers and the Moral Hazard.


“JP Morgan/Madoff Case Puts Spotlight on Use of Lawyers as Investigation-Blockers.”
Yves Smith, March 5, 2014.


“Literature Review on Corporate Governance and the Recent Financial Crisis.”
Hussein Tarraf, December 27, 2010.


Fool’s Gold
Gillian Tett, New York: Free Press, 2010.
Chapter 10 (“Tremors”), pages 143-164


The Turner Review: A Regulatory Response to the Global Banking Crisis
Lord Adair Turner, London: Financial Services Authority, March 2009.
Read: “1. What Went Wrong?”, pages 11-28; “1.4. Fundamental theoretical issues,” pages 39-49


Speech to the South African Reserve Bank, November 2, 2012
Lord Adair Turner
“…the existence of banks as we know them today – fractional reserve banks – exacerbates these risks because banks can create credit and private money, and unless controlled, will tend to create sub-optimally large or sub-optimally unstable quantities of both credit and private money.”


“Too Much of the Wrong Sort of Capital Flow.”
Lord Adair Turner, January 2014.


Between Debt and the Devil: Money, Credit, and Fixing Global Finance
Lord Adair Turner, Princeton, NJ: Princeton University Press, 2015.


Fate of the States
Meredith Whitney, New York: Portfolio Penguin, 2013.


Film: “Inside Job” won an Oscar for best documentary movie. Written and directed by Charles Ferguson and narrated by Matt Damon, the film exposes the problems leading to the financial meltdown and the roots of the causes in the incestuous relationships among investors, journalists, academics, and politicians.

Déjà vu? The New “John Laws” and “Ivar Kreugers.” The Cases of China and Trump


Fraud: An American History from Barnum to Madoff
Edward J. Balleisen, Princeton, N.J.: Princeton University Press 2017.


Financial Fraud A Literature Review.” MPIfG Discussion Paper 16/5
Arjan Reurink, MPIfG Discussion Paper 16/5, Max Planck Institute for the Study of Societies, May 2016.


“Explanatory Case Study on Factors that Contribute to the Commission of Financial Fraud.”
Ronald Spicer, Northcentral University 2016
Need/and or greed were key factors in 48 of 60 cases of fraud studied, while risk-taking behavior and the belief that the ends justify the means figured in 42 cases.


“Financial Reporting Fraud: Public and Private Companies.”
A. Scott Fleming, Dana R. Hermanson, Mary-Jo Kranacher, and Richard A. Riley, Jr., Journal of Forensic Accounting Research: December 2016, Vol. 1, No. 1, pp. A27-A41.


The financial cost of fraud 2017: the latest data from around the world.
Mark Button and Jim Gee, London: Crowe Clark Whithill 2017.


“Bubble Economics: How Big a Shock to China’s Real Estate Sector Will Throw the Country into Recession, and Why Does It Matter?”
Bryane Michael and Simon X. Zhao, Working Paper, Lincoln Institute on Land Policy, May 2016.



“How Big Is the Chinese Real Estate Bubble and Why Hasn’t It Yet Burst. A Comparative Study Between China and World Major Financial Crises 1980–2014.”
Working Paper, Lincoln Institute on Land Policy, June 2016.


“China’s Financial Interlinkages And Implications For Inter-Agency Coordination.”
Min Liao, Tao Sun, and Jinfan Zhang, IMF Working Paper 16/81, August 2016.


“Does infrastructure investment lead to economic growth or economic fraility? Evidence from China.”
Atif Ansar, Bent Flyvbjerg, Alexander Budzier, and Daniel Lunn, Oxford Review of Economic Policy, Volume 32, Number 3, 2016, pp. 360–390.