Nerds on Wall Street: Math, Machines, and Wired Markets

13.2. New American Bank Initiative

October 2008 was a tense month, and November was no better. Was the financial sky falling? Would there be a sequel to the 2004 October election surprise message from Osama bin Laden, or worse? Would Sarah-cuda have to revert to her old Wasilla thrift store wardrobe and flat shoes? Like many other people, I kept at least one anxious eye on the news. It wasn't pretty:

U.S. banks getting more than $163 billion from the Treasury Department for new lending are on pace to pay more than half of that sum to their shareholders, with government permission, over the next three years.

—Binyamin Appelbaum, "Banks to Continue Paying Dividends" (Washington Post, October 30, 2008)

Banks getting $125 billion from U.S. taxpayers to unlock the credit crunch are saying they'd rather hoard the money than use it for loans.

—Jody Shenn, "Banks Hoard Money Meant to Boost Economy, Lender Says" (Bloomberg.com, November 7, 2008)

Watching CNN (with the sound off, as I tried to work on this book), I noticed Sal Khan, an earnest-looking young man, drawing colorful diagrams about the banking crisis. The Dow Jones Industrial Average, which had dropped over 450 points earlier in the day when the soon-to-be-ex-president reassured the country everything was under control, moved up more than 400 points as Sal spoke. This warranted turning on the sound and rolling back the TiVo to see what was going on. I was blown away by the simplicity and obvious merit of his proposal, and the ...