RECOMMENDED READING FOR OBAMA…. The Washington Monthly has a feature in our new issue with book recommendations for the new president, with suggestions from some of our favorite writers and thinkers. We’re covering the recommendations in an ongoing series of posts, and here are the next two from our list.

Rachel Maddow:

The new president should read The Edge of Disaster, by Stephen Flynn, despite its generic Chicken Little title. Flynn has the politics and the strategy exactly right for the two big business-of-government tasks facing the new administration: (1) annulling the previous politics of “homeland security” and getting it right this time; and (2) massively upscaling our investment in infrastructure. It’s hard to be rational and rigorous and constructive when thinking about catastrophe — but that’s exactly what we need.

Joe Nocera:

“I can’t believe some of this stuff is legal,” a high-ranking government official said to me a few months ago, right around the time that all hell was truly breaking loose. It was when Lehman was going bankrupt, and AIG was teetering on the brink, and Merrill Lynch was being sold, and Morgan Stanley and even mighty Goldman Sachs were rumored to be in serious trouble. And “this stuff” the official was referring to were some of the more exotic, complex, and fiendishly hard-to-value derivative securities that were imploding like dynamite sticks, bringing down the financial system with them.

Barack Obama has so many things he wants to accomplish, in health care, education, the environment, and so on, but none of them will get done if he doesn’t first get his hands around the financial crisis. We all know he’s been brushing up on FDR’s first 100 days, and that’s all to the good. Saving the auto industry, getting banks to lend again, creating the kind of mega-stimulus package to get the economy back on its feet — these are all things he is going to tackle early on.

But then he is going to have to figure out how to fix the financial system filled with “that stuff.” And to do so he is going to have to build a new regulatory apparatus, because the old one has clearly broken down. That’s where my two book recommendations come in.

The first is A Demon of Our Own Design, by Richard Bookstaber, a memoir with a point by a Wall Street veteran. Bookstaber, a risk manager, chronicles the rising complexity of Wall Street, through the prism of his own experience. Taking us through such traumatic events as the crash of 1987 and the collapse of Long-Term Capital Management in the late 1990s, he makes a powerful case that “these breakdowns come about not in spite of our efforts at improving market design but because of them. The structural risk in the financial markets is a direct result of our attempts to improve the state of the financial markets; its origins are in what we would generally chalk up as progress. The steps we have taken to make the markets more attuned to our investment desires … have exaggerated the pace of activity and the complexity of financial instruments that makes crisis inevitable. Complexity cloaks catastrophe.” And so it has. Figuring out how to either make the system less complex or the risks more transparent to all will be a key part of any new system of financial regulation.

My second recommendation is that the incoming president read some of the writings of Warren Buffett, in particular the annual reports of Berkshire Hathaway, his holding company. Happily, they are collected in a book, The Essays of Warren Buffett: Lessons for Corporate America. Actually, they include lessons for everyone, not just corporate executives. It was Buffett who wrote in his annual report several years ago that derivatives were “financial weapons of mass destruction.” But the main lesson he teaches is that the best kind of investing has a value system attached to it. Buffett buys companies, not stocks. He thinks about the long term, not the short term. He became very rich by not trying to get rich quick. He has tackled the problems with stock options, and with executive compensation. (Believe it or not, Buffett’s executives at Berkshire Hathaway don’t get any options; he doesn’t believe in them.) In many ways, his rules for investing are rules to live by, and Obama could do worse than use his bully pulpit to preach them to the rest of us.

Our ideas can save democracy... But we need your help! Donate Now!

Follow Steve on Twitter @stevebenen. Steve Benen is a producer at MSNBC's The Rachel Maddow Show. He was the principal contributor to the Washington Monthly's Political Animal blog from August 2008 until January 2012.