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TOO BIG TO FAIL: INSIDE THE BATTLE TO SAVE WALL STREET (original 2009; edition 2010)

by Andrew Ross Sorkin

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Member:Daibhi
Title:TOO BIG TO FAIL: INSIDE THE BATTLE TO SAVE WALL STREET
Authors:Andrew Ross Sorkin
Info:PENGUIN (2010), Paperback
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Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves by Andrew Ross Sorkin (2009)

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English (31)  Dutch (1)  French (1)  All (33)
Showing 1-5 of 31 (next | show all)
Fascinating tale of the Wall Street financial crisis, compiled from interviews and documents, by reporter Andrew Ross Sorkin. ( )
  ladyoflorien | Oct 2, 2016 |
Entertaining and educational. I have a much better understanding of what it was that caused the financial system meltdown and why banks were using these financial instruments. The book was a bit character heavy, I really needed an organizational chart in front me while reading - so many CEOs and their financial deputies mentioned throughout the book. ( )
  beebowallace | Jul 1, 2014 |
I feel proud for getting to the end of this, because there were times I didn’t think I was going to make it. Not that there’s anything wrong with it. The author explains everything clearly and no one can say this is a story without narrative drive.

In the end, though, I’m not sure whether Sorkin isn’t trying to do too much - a pacy blockbuster and an academically respectable analysis rolled into one - but he manages the balancing act as well as anyone could. His major problem is the incredibly long cast-list, both individuals and institutions. In fairness, there’s a dramatis personae at the beginning, but it’s organised by institution rather than individual, so that, for example, if you forget who Mark Feldman is - a name I chose at random for the purposes of this review - you can’t just look under ‘F’: you have to go through each organisation until you get to ‘JP Morgan Chase’ - and there he is, sixth name down. (And, yes, there is an index, but it’s only reasonably helpful in this regard: ‘Feldman, Mark, AIG final capital search, 340, 379, 384). None of this is helped by the fact that none of the big players on Wall Street are well-known names. The consequence was that it was only by about page 400 that I felt I was getting to really known them all.

The two biggest characters in Too Big To Fail are Dick Fuld, CEO of Lehman Brothers, and Hank Paulson, Secretary of the US Treasury. Sorkin has a lot of sympathy for Fuld (p539), while Paulson is undoubtedly the closest the book has to a hero. Sorkin’s admiration for Paulson is far from unqualified. “It cannot be denied,” he writes, “that federal officials - including Paulson, Bernanke and Geithner - contributed to the market turmoil through a series of inconsistent decisions. They offered a safety net to Bear Stearns and backstopped Fannie Mae and Freddie Mac but allowed Lehman to fall into [bankruptcy], only to rescue AIG soon after. What was the pattern? What were the rules? There didn’t appear to be any, and when investors grew confused … they not surprisingly began to panic” (p539).

Reading this book as a British citizen, I must admit to feeling it told me quite a lot about the US attitude to the UK. At one point, the British are all but given the blame for the fall of Lehman, after HM government refuses, late on, to back the Barclay’s bid for it. “‘He’s (ie, Alistair Darling) not going to do it,’ Paulson told Geithner in amazement. ‘He said he didn’t want to “import our cancer”’” (p350). One wonders how the Bush administration would have reacted, being asked to guarantee a similar project only in reverse?

Oh, and hold on. Rather later in the book, the British help save the day: Goldman Sachs is on its way under, and Mr Darling introduces a partial ban on short-selling in the UK. “But just then, at 1pm, the market - and Goldman’s stock - suddenly turned around, with Goldman rising to $87 a share, then $89. Traders raced through their screens trying to determine what had been responsible for the lift, and discovered that the Financial Services Authority in the UK had announced a thirty-day ban on short selling twenty-nine financial stocks, including Goldman Sachs. It was exactly what Blankfein and Mack had tried to persuade the SEC’s Christopher Cox to do” (p441). Indeed, just about all the main troubled giants on Wall Street have called for some sort of ban on short-selling throughout the book, some of them vociferously, but the US government won’t hear of it. Anyway, Goldman Sachs is retrieved at the eleventh hour by the decisive action of the UK government. How do its employees react? Three cheers for Great Britain? A rousing chorus of God Save the Queen? No, “a young trader found a copy of ‘The Star Spangled Banner’ on the internet and broadcast it over the speakers to commemorate the moment. About three dozen traders stood up from their desks, placed their hands over their hearts, and sang aloud, accompanied by high fives and cheers” (p442).

Sheesh, that’s gratitude. But then, as Matt Taibbi apparently wrote in Rolling Stone, Goldman Sachs is “a great vampire squid wrapped around the face of humanity, relentlessly jamming its blood funnel into anything that smells like money” (p537). Typical squid gratitude perhaps.

This is a very good account of the Wall Street Crash of 2008. To intending readers, I’d advise putting aside one large chunk of time to read it, rather than lots of little chunks: that way you’re more likely to maintain a handle on the characters and events. And, at 530 pages of small font, you’ve got to be very, very interested in this particular historical event. I wasn’t perhaps enough - but I still managed to finish it anyway. I’m glad I did. ( )
  James_Ward | Dec 27, 2013 |
liking this but it is due!
  lindap69 | Apr 5, 2013 |
What the financial crisis in the US essentially came down to was the bankers had the government balls in a nice tight wrench and if those balls got gangrene and dropped off, leaving the whole of the Western world without a banking system and the ensuing anarchy, they couldn't care less because they were filthy rich anyway and would, personally, all of them be more than just all right. (Skip to the last-but-two paragraph if you don't want the lead-up to how).

How it works, in a simplified way (the only way I can grasp it, financial pea-brain as I am and leaves out the part insurance companies played) is that the banks use their money, our money, our deposits, to make money by lending it out as mortgages and business loans. They make money on the interest people have to pay for those loans. If the standards for getting a loan are pretty lax (as they were at the time) then a lot of people won't be able to repay their loans and the bank doesn't have the money, isn't earning interest but has a dud house that won't sell for a profitable amount or a bankrupt business. So the bank isn't making any money but in an effort to do so, it relaxes restrictions on getting a loan even more so even more people borrow money and fail to repay it in this depressed economy... etc. etc. etc.

There is another arm to this banking scam business, that is investment, and here's where the big bucks come in. Investment bankers are always looking for good businesses where they can buy shares at a much lower price than they think they will rise to in the future, then they can sell them and realise a profit. Of course, there is always the risk they made a wrong judgement call and the shares fall in price and as they are on their way down they have to decide whether to stick with them and hold on to them and hope they will go up (some time) or get out with a reduced amount. Either way the bank is holding on to some pretty worthless stuff, like the houses that got foreclosed and won't sell for the value of the loan and the bankrupt businesses, or they've taken a loss on the shares either completely or close enough.

So there you have it, whatever the banks did in a depressed economy they were losing money.

If everyone were to go to their bank to withdraw all their money they couldn't as the banks have lost some of the money on those unwise deals, and have more locked up in loans and investments that might pay up or might also go belly-up. So some of the bigger investors seeing that Lehmans among other banks looked like they were full of bad debts and old houses and not much cash wanted their money out. On Wall Street, people took notice of big investors pulling their money out, and more people did, and started to look at the other banks (most of whom were in exactly the same position). So these big investors were pulling their money out from everywhere and looking to the Far East and points South, North, East and West where the bankers had been more regulated by government and not allowed to carry on risking people's money to the degree there was no longer enough to pay people their money back.

So the banks couldn't pay back the depositors their money, and like a pack of cards one after the other began to collapse. The next thing, the final thing really, was the fear that you and me and everyone else on your street would suddenly wake up and realise what was happening with the big investors was happening to you too and be in the queue at their bank at 9 a.m. to withdraw their money. And the bank wouldn't have it. Can you imagine the scene? Smashed ATMs and rioting. Businesses would not pay their overnight deposits in the next night, everyone would demand to be paid in cash, shops would not accept credit cards, debit cards wouldn't work. There would be anarchy in the streets. And the government would fall.

The US holds the principles of capitalism far too dear and always sees Communism when nationalisation and regulation of industries is debated, even when, as with the bankers it was obviously needed. So before a rescue package could be put together, they had to overcome the Fear of the Bogeyman. Once they did that, they could put together a financial package loaning the banks at very favourable terms, enough billions that everyone who wanted their money could get it and their would be enough left over to invest and hopefully restore the banks to their usual obscenely greedy profit-making. What really swayed them was the fact that the government would fall and they, Bush's Republicans, would 100% definitely be out of a job.

So now is the time for regulating the banks and how they spend these vast sums that are being loaned to them. But guess what? The bankers won't accept any meaningful regulation at all. Its fine by them if the banks collapse, they've all been drawing huge salaries and bonuses often in the millions. And knowing the collapse was coming you can be sure their money was holed up somewhere safe. So the government had a three way choice. One, let the banks collapse and the government along with it producing a Depression so major that it would reverberate around the world and make the depression of the 30s look like some minor thing that happened way back when. Two, call the bankers' bluff and bail out the banks and regulate their investments so that our homes, our small businesses and our money was safe by stopping the bankers risky behaviour (this would have benefited the average person, you and me). Three, give in to the bankers, let them invest as they please make huge profits (if they could) and then awarding themselves multi-million dollar salaries and bonuses and throwing us, average Joes, to the pits.

The investment bankers said if you put any restrictions on us, we will all leave, we will retire, we will go to other countries' banks, we will do as we please, but we will not work in any bank that restricts how we do our business, so we got you over a barrel, either you do it our way or no way. Hahaha

Yep. By the balls. And the average Joe ....

So the situation now is as it was, seven financial institutions control the banking system of the US and should they fail, well, read the book!

--------------------------------------------------​

(Just a note, the more a country relies on financial products the more it is susceptible to a depression. If the country relies on manufacturing items people want - China, Germany, South Korea etc - then its in a much stronger situation. Sure it could be hard to raise money to buy raw materials and machinery if the banks go, but what they have sold and have to sell gives them cash coming in.

Another note, you paid the bankers salaries and bonuses, you paid for their bail out when they did it wrong and you are paying through interest for their salaries and bonuses again. What interest does the bank give you on your deposit? Essentially, the public is triple screwed.).

What are the alternatives to the banking system? Buy gold, ingots not jewellery, you don't want to pay for the design, and find somewhere safe to put it, ie. not a bank. Or... money under the mattress!
( )
  Petra.Xs | Apr 2, 2013 |
Showing 1-5 of 31 (next | show all)
Andrew Ross Sorkin's blow-by-blow account of the unfolding of events in the US, when financial titans up to and including Goldman Sachs were days, or even hours, away from running out of liquidity, gives a handy dramatis personae of those inhabiting Wall Street's Jurassic Park, in the manner of a compendious Russian novel
added by mikeg2 | editThe Guardian, Ruth Sunderland (Dec 13, 2009)
 
Sorkin’s prodigious reporting and lively writing put the reader in the room for some of the biggest-dollar conference calls in history. It’s an entertaining, brisk book.
 
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Size, we are told, is not a crime. But size may, at least, become noxious by reason of the means through which it was attained or the uses to which it is put. - Louis Brandeis
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To my parents, Joan and Larry, and my loving wife, Pilar
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Amazon.com Product Description (ISBN 0670021253, Hardcover)

A real-life thriller about the most tumultuous period in America’s financial history by an acclaimed New York Times Reporter

Andrew Ross Sorkin delivers the first true behind-the-scenes, moment-by-moment account of how the greatest financial crisis since the Great Depression developed into a global tsunami. From inside the corner office at Lehman Brothers to secret meetings in South Korea, and the corridors of Washington, Too Big to Fail is the definitive story of the most powerful men and women in finance and politics grappling with success and failure, ego and greed, and, ultimately, the fate of the world’s economy.

“We’ve got to get some foam down on the runway!” a sleepless Timothy Geithner, the then-president of the Federal Reserve of New York, would tell Henry M. Paulson, the Treasury secretary, about the catastrophic crash the world’s financial system would experience.

Through unprecedented access to the players involved, Too Big to Fail re-creates all the drama and turmoil, revealing never disclosed details and elucidating how decisions made on Wall Street over the past decade sowed the seeds of the debacle. This true story is not just a look at banks that were “too big to fail,” it is a real-life thriller with a cast of bold-faced names who themselves thought they were too big to fail.

(retrieved from Amazon Thu, 12 Mar 2015 18:15:00 -0400)

(see all 2 descriptions)

Presents a moment-by-moment account of the recent financial collapse that documents state efforts to prevent an economic disaster, offering insight into the pivotal consequences of decisions made throughout the past decade.

(summary from another edition)

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