Preface
In 2009 The Times newspaper of London carried an interview with Paul Volcker. The former chairman of the Federal Reserve “berated bankers for their failure to acknowledge a problem with personal rewards and questioned their claims for financial innovation.” According to The Times, Mr. Volcker rebuked “senior figures in the financial world for failing to grasp the magnitude of the financial crisis and belittled their suggested reforms.” As bankers demanded that new regulation should not stifle innovation, Mr. Volcker was quoted as saying, “The biggest innovation in the industry over the past 20 years has been the cash machine.”
It's a pity that this impression is now fairly commonplace in business, media, and political circles. One only has to look at the mobile telephone industry, and to be aware that it was financed mainly by recourse to financial engineering techniques that included securitization, to understand that innovation in finance has often been a force for much good in the world. It is worthy of preservation, and if one was to observe a rickshaw puller on the streets of Dhaka, Bangladesh (average salary $1 per day) using a cell phone, one would indeed be convinced of this. The technology needed to make the cell phone available to a mass population worldwide required hundreds of billions of dollars in investment, and a fair proportion of these funds were raised via the securitization markets.
This book is not a general textbook on banking or finance, much less ...
