By: La Papillion I've finished the very readable book by Roger Lowenstein, titled "Origins of the Crash". There are many books that talked about crashes, but this book focuses more on the dot.com bubble, collapse of Enron, accounting scandal at Andersen and the telecommunications bubble, with the author linking the excesses of past markets to the downfall of future bubble. There are a few key take aways that I got from this book. Bubbles are caused by a series of factors: 1. Lack of corporate governance. There are stories of dot.com companies where the CEO and chairman of the board of directors are the same person. Boards full of the CEO's 'independent' friends, some of whom are blatantly related in familial ties, some are the CEO's lawyers, accountants and so on. Audit committee do a perfunctory job of looking through results, and had absolute trust in the CEO. Special purpose vehicles (SPV) are set up to transfer assets to these, so as to lighten the balance sheet to make it more attractive, less debt-ridden and thus able to borrow more. 2. Massive conflicts of interest CEO is paid to direct the company. Board of directors are supposed to monitor the performance of the CEO. Audit committee in the board are supposed to monitor the results of the company, while external accounting firms are supposed to make sure the results released satisfied accounting standards. Read more..