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This is a very good book if you want to know what happened to Lehman Brothers but, if like me, you want to understand why and how the crash happened, this may not be the book for you. It largely focuses on Lehman Brothers who were not the first major financial institution to fall in the crash and, because of this, there is not enough time to go into the same detail about the other banks (and others) that were involved. It also assumes some knowledge of the types of financial products that were being traded (such as Credit Default Swaps) without much, or any, explanation of how they worked. As these products were all interconnected, a better explanation would have allowed me to understand why the failure of one product would have a knock on effect in another.
It does provide a good, detailed, insight into the pressure that the main characters were under at the time and is an enjoyable read despite my criticisms above.
Hindsight is a wonderful thing and books are normally written with the benefit of hindsight. But this account of the response to the catastrophic events in 2008 of as they unfold, portrays the uncertainty and momentousness of the decisions made on a day to day basis to prevent world financial meltdown. It provides a gripping, page turning read even for someone unfamiliar with Wall Street.
Sorkin touches on the seeds to the disaster - the deregulation of the banks in the late 1990's. the push to increase home ownership which encouraged lax mortgage standards, historically low interest rates. which created the liquidity bubble, and the system of Wall street compensation that rewarded short - term risk taking. They all came together to create the perfect storm.
The account of the battle to save Wall Street interweaves the responses and actions of many of the leading players from Hank Paulson of the US Treasury, Tim Geithner President of the New York Federal Reserve, to CEO's, legal advisors and other key characters in the 9 major banks, and the key insurance and mortgage companies. With the sheer number and complexity of the simultaneous negotiations, this could lead to total confusion, but Sorbin manages to provide a comprehendable picture of this complex situation.
The book portrays the idiosyncracies and personal agendas of the people leading the financial institutions as they respond to the financial hurricane. After the decisions of the Federal officials, Paulson, Geithner and Bernanke, to intervene directly with Freddie Mac and Fanny Mae and their underwriting the toxic assets of Bear Stearns to allow Jamie Dimon of JP Morgan to buy the first investment bank casualty, the pressure was on them not to bail out the fat cat bankers but to allow the market to find a solution to the investment banks' predicaments. When the British FSA refused to allow Barclay to buy Lehmans and expose itself to risk associated with its toxic assets, the deal negotiated by CEO, Bob Diamond, collapsed and Lehman's had to go into Chapter 11 bankruptcy. This decision was followed by the rescue of AIG by US Federal Bank's underwriting of its merger with the Bank of America.
Sorkin vividly describes the "policy by deal" that followed Lehman's bankruptcy and AIG bail out as the investment banks frantically negotiated major mergers or refinancing deals, often within the space of 24 hours, to avoid running out of cash as the financial system ground to a halt. And he describes Paulson, Geithner and Bernanke's decisions, perhaps belatedly to introduce fiscal measures through TARP, through opening up lines of credit and direct investment by the USA government in the 9 major banks.
The book provides food for thought on whether the battle averted disaster or whether it was a series of decisive but reactive actions.
This book well deserves its shortlisting for the Samuel Johnson non fiction book of the year 2010.
This book would have been easier to follow and more impactful if it had been shorter. You can see the author's problem from the 38 page appendix (in small typeface) "Notes and Sources", where he lists the sources he was allowed to cite, though he also had plenty more from sources he was not allowed to cite. Most reviewers have reveled in this level of detail - but some readers will find it just gets in the way.
My abiding insight after finishing the book is that few if any of the big hitters of Wall Street had any particular wisdom. Many financial institutions were brought to the knees because their leaders completely failed to understand the level of risk they had taken on. They were not nearly as smart as their pay-packets implied, but just ordinary human beings who had risen above their levels of competence.
In summary, this book does give you a lot of insight into the events on Wall Street, and little insight into the peripheral role played by some UK banks. But unless you like devouring a large stack of background material, you will find it frustratingly long-winded.
Might not be good for your blood pressure - why did govts in the US, UK and elsewhere throw so much money at this industry populated with so many useless greedy £uckw1t$ ? Why weren't they regulated enough to make their misadventures their own problem, not society's problem ? Are we doing enough to prevent a repeat ?
entertaining read - compulsive. The characters are compelling and the personal motivations are credible. There are a few factual inaccuracies - you may get the feeling that the author was in a race with Dan brown to see who could write a book fastest... but they dont detract materially
How did Sorskin persuade everyone who matters to contribute to this book, from Hank Paulson to Dick Fuld? From those with reputations still intact, to those with nothing left to lose? Normally, only the most "senior" journalists can pull that level of influence. For the sequel, Sorskin should write a thriller about the arm twisting and negotiations behind the book. Were there anonymous phone calls? Documents posted through his letterbox in the middle of the night? Did any of the participants just want history to be documented, or did they all want to spin history, or unspin someone else' history?
Three things struck me about this book. Firstly, that a few people had seen it coming, maybe. Hank Paulson's proposal wasn't written overnight. Secondly, that people who control billions of dollars (even the winners in this story) are not superhuman or super-intelligent, and are often just as confused and fallible as the rest of us. They just pretend otherwise. Thirdly, from a British point of view, that the UK was just a spectator. Those few frantic weeks in 2008 were an American story.
......so there is little point in banging on about this book's virtues......it is a truly brilliant account of the panic and fear that gripped the financial markets pre and post the demise of Lehmans and the dogged determination of Hank Paulson, Tim Geithner and a comparatively small group of government officials and self-interested bankers, that staved off a total shut-down of the world's financial markets and the onset of the worst global depression ever. There I've gone and banged on about it!
Economic history narration cannot get any better. Requires no previous financial nous to appreciate this addictively readable book.
One word of warning however. Any illusions that those we entrust to look after our money, investments and pensions etc are superior beings, are blown out of the water as they are generally shown to be weak, not over intelligent individuals driven by personal greed and egotistical hankerings and with little or no awareness of longer term risk implications of their actions. Then its not their money ...........!
How Andrew Sorkin will follow this book, I don't know but whatever it is I'll be buying.
Okay, so I took the tag line off the back cover of the book, it seems that I agree with the views of a Telegraph journalist. Andrew Ross Sorkin's book describes the events leading up to the financial crash in September 2008 and the chaos that ensued culminating in Lehman's downfall, the bailout of AIG and billions of dollars of other government bailouts. The way the book is structured gives it the feeling of reading a Dan Brown novel or watching a series of 24 - very high paced and very easy reading. One thing I really enjoyed is that the author takes the time to introduce each character, giving a mini biography when they appear which makes interesting reading and also easier to keep track of the growing cast. To the author's credit he keeps a neutral view point of the characters throughout, it would have been very easy to vilify certain members of the cast as has happened in the media.
For me, the weaknesses of the book were the conclusion which was lacking a bit of substance and the lack of explanation behind the financial terminology. Perhaps some people don't really want to understand what a Credit Default Swap is, how they work and the role they played? But if like me, you are interested then there you are left wondering why all this was happening. I recommend reading John Lanchester's book,
Whoops!: Why everyone owes everyone and no one can pay
, which explains how these financial instruments work to the unfamiliar reader.
Too Big to Fail tells the story of the big Wall Street Crash in an easy accessible, understandable to the layperson, format - that being of a novel.
It is very US centric, the author is clearly somewhat in love with JP Morgan and avoids any meaningful discussion of the issues in the UK (remember that London is as large and as important a financial centre as New York) i.e RBS, HBOS, Northern Rock etc. For a review of this, read Masters of Nothing which gives a great perspective.
It was written too early to cover the sovereign debt crisis in any meaningful way too, but it does give an exemplary account from the perspective of those embroiled in the 2007/2008 debt crisis and is well worth a read.
This is a bit of a beast of a book, but well worth the investment of time to read it. It gives a detailed (and I mean detailed) breakdown of what actually happened before, during and after the financial crisis. I had no idea of the impact that the banking sector had on our everyday lives and how tied up it was with insurance providers and government. This book is an education, that's for sure.
Students of the world of finance should be warned that this is written like a novel with reams of invented verbiage. It may be the closest we come to knowing what went on overall as Anglo-America struggled with unfettered market ideological idiocies: British readers may find the interpretation of Brown and Darling's decisions interesting in relation to Lehman and Barclays.
For a more readable report/explanation, not simply relying on a journo's interviews with people trying to rewrite history, try the Lehman insider's view of Larry McMacdonald 'A Colossal Failure of Common Sense'. He puts the mortgage scams in perspective.