BREAK UP GOLDMAN SACHS …………. ROUBINI

BY: BLOOMBERG

Wall Street’s bubble-prone bankers.

Break up Goldman Sachs Group Inc., he says. Consider banning collateralized debt obligations. And why not compensate traders with slices of their own exotic securities instead of with cash or shares?

These prescriptions crop up in “Crisis Economics,” a rigorous yet highly readable look at why booms and busts occur and how to keep them from wreaking havoc on the real economy.

Roubini is usually remembered as “Dr. Doom.” He’s the New York University professor who predicted in 2006 that the U.S. would soon suffer a once-in-a-lifetime housing bust and deep recession. What’s less appreciated is that he based his forecast on years of studying booms and busts. His conclusion: Financial crises are hardwired into capitalism.

“Far from being the exception, crises are the norm,” he says in this book, written with journalist Stephen Mihm. To prove the point, they open with a brisk history of crises, from currency debasements in 12th-century Europe to the collapse of Lehman Brothers Holdings Inc.

By the 18th century, asset bubbles had become a common feature of capitalism: Witness John Law’s Mississippi Company and the South Sea Bubble. Panics punctuated the 19th century, and the crisis of 1907 famously prompted J. Pierpont Morgan Sr. to lock bankers up in his private library until they agreed to rescue the Trust Company of America.

More > Roubini Urges Goldman Sachs Breakup, Possible CDO Ban: Books – Bloomberg.com

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