Table of Contents

Foreword by Jeffrey Sachs. Preface.

Acknowledgments.

Chapter 1 It?s a Horrible Mess.

It?s Not Bailey Savings & Loan.

Economics Diary, Spring 2009: The D Word.

Economics Diary, August 22, 2009.

The Treasury?s No-Stress Stress Test.

Economics Diary, August 26, 2009: The State of the States.

It?s the Psychology, Duh!.

When Lexington, Massachusetts, Turns into Camden, New Jersey.

Economics Diary, August 29, 2009: The Great D or the Great R?

Systemic Risk Insurance.

Who?s Backstopping the Backstop?

Trust Doesn?t Come Cheap.

Full Nondisclosure.

A System with No Firewalls.

Chapter 2 The Big Con: Financial Malfeasance, American Style.

Richard Fuld or Elmer Fudd?

Playing Bridge as Bear Burned.

Macho, Macho Men.

Stan the Man.

Economic Diary, August 11, 2009: Uncle Sam Sues Uncle Sam.

Economics Diary, September 14, 2009: Judge Rakoff to the SEC: "Drop Dead".

The Prince of Redness.

CDOs to the Races.

CDO Liquidity Puts.

AIG?s Three-Hundred-Million-Dollar Man.

Franklin Delano Raines.

Speculation with Other People?s Money.

It?s the Leveraging, Not the Leverage.

Stealing Other People?s Money.

Madoff ?s Ponzi Scheme.

The Essence of Ponzi Schemes.

Economics? Take on Ponzi Schemes.

Don?t Show Me the Money.

The Real Crime in a Ponzi Scheme.

Is the U.S. Banking System a Ponzi Scheme?

From Ponzi Schemes to Full Disclosure.

Disclosure Is Essential.

Disclosure Is Not Enough.

Uncle Sam?s Ponzi Scheme.

Fiscal Gap Accounting.

Why Is the U.S. Fiscal Gap So Large?

Social Security?s Unfunded Liability.

Is the U.S. Bankrupt?

Chapter 3 Uncle Sam?s Dangerous Medicine.

Sam?s Got Your Back.

Maturity Transformation in Theory and Practice.

Backing the Buck.

Opening Pandora?s Box.

Economics Diary, September 14, 2009: Trade/Financial War with China?

Our Once and Future Horrible Mess.

Big Brother, Can You Spare One Hundred Billion?

Bailing Out Corporate Pensions.

Recapitalizing the Banks.

Buying Up Toxic Assets.

GASP?The Geithner and Summers Plan.

Putting More of Someone Else?s Skin in the Game.

Leverage upon Leverage.

"Weapons of Mass Financial Destruction".

Proposed "Control of Derivatives".

The Dangers of Putting Wall Street on a Leash.

Chapter 4 "This Sucker Could Go Down".

Taking Stock.

We Are Not All Keynesians Now.

Reviewing the Case for Radical Surgery.

Chapter 5 Limited Purpose Banking.

Full Disclosure?No Plan Is Perfect.

Banks = Mutual Funds.

The Federal Financial Authority.

Ending Insider Rating.

Bye-Bye, Bernie, Bye-Bye, Allen.

Initiation, Not Securitization, Is the Problem.

Securitizing Death.

Cash Mutual Funds.

Obviating FDIC Insurance and Capital Requirements.

Cash Mutual Funds and Narrow Banking.

Regaining Control of the Money Supply.

Insurance Mutual Funds.

Illustrating a Life Insurance Mutual Fund.

Insuring the Uninsurable?A Life Insurance Example.

The Financial Risk of Swine Flu.

LPB Life Insurance Mutual Funds and Tontines.

Illustrating Other Types of Insurance Mutual Funds.

LPB Lets Us Leverage Us, But Not Our Countrymen.

Using Insurance Mutual Funds to Buy and Sell CDSs.

Sharing Aggregate Risk.

Parimutuel Betting and Insurance Mutual Funds.

Betting on More than One Horse/Mortality Rate.

Illustrating a Homeowner?s Insurance Mutual Fund.

Helping Solve the Corporate Governance Problem.

Relationship of Limited Purpose Banking to Glass-Steagall.

Isn?t LPB Simply Imposing 100 Percent Capital Requirements?

Chapter 6 Getting from Here to There.

Implementing Limited Purpose Banking.

Zombies and Gazelles.

Deleveraging Investment Banking and Trading.

An End to Rogue Trading.

The Politics of Limited Purpose Banking.

Chapter 7 What About?

Can We Just Agree to Agree?

Will LPB Reduce Liquidity?

Will LPB Reduce Credit?

Who Will Lend to Business?

Will LPB Reduce Leverage?

Will LPB Shrink the Financial Sector?

Doesn?t LPB Force Us to Become Our Own Bankers?

Isn?t LPB Reducing the Amount of Safe Assets?

Does LPB Require Homemade Insurance Policies?

Insuring Against Changes in Insurability.

With LPB You Don?t Know the Odds Until It?s Too Late.

Why Not Simply Correctly Price the Government?s Guarantees?

How Will Monetary Policy Operate?

What about Foreign Assets?

Won?t Americans Just Bank Abroad?

Doesn?t LPB Dramatically Shrink the Money Supply?

What?s the Role of the FFA in Investment Banking?

What about Venture Capital, Private Equity Firms, and Hedge Funds?

Is GE a Bank under LPB?

Can?t Nonfinancial Corporations Play Conventional Bank?

Why Let Proprietorships Run Traditional Banks?

Will LPB Prevent Financial Panics?

LPB Will Destroy Valuable Relationships and Information Banks Have About Their Borrowers.

Economics Diary, November 11, 2009: Whither the Economy?

Chapter 8 Conclusion.

Afterword Fixing the Rest of Our Economic Mess.

Fixing Taxes: The Purple Tax.

Fixing Healthcare: Medicare Part C for All!.

Fixing Social Security and Retirement Accounts: The Personal Security System.

Removing the Fiscal and Economic Swords of Damocles.

Notes.

About the Author.

Index.

About the Author

LAURENCE J. KOTLIKOFF is a William Fairfield Warren Professor of Economics at Boston University, Fellow of the American Academy of Arts and Sciences, Research Associate of the National Bureau of Economic Research, Fellow of the Econometric Society, and former Senior Economist, President's Council of Economic Advisers. Coauthor of The Coming Generational Storm and Spend 'Til the End and author of The Healthcare Fix, Kotlikoff has been published extensively in the nation's leading newspapers, magazines, and financial web sites on financial reform, taxes, saving, growth, deficits, Social Security, healthcare, pensions, and personal finance.

Reviews

'...a thought-provoking new book...' (Financial Times, April 2010). '[A] detailed description of what he sees as the banking system of the future...a plausible roadmap for how to get there...' (Financial World, July/August 2010). '[Kotlikoff's] arguments for protecting deposits by banning banks from lending money not matched in cash reserves is compelling.' (The Independent, February 2010). 'Kotlikoff's work is worth a read...' (The Observer, March 2010).