Andrew Ross Sorkin

This is the story of how Treasury Secretary Hank Paulson and the Federal Reserve tried but failed to head off the collapse of Lehman Brothers in 2008 as told in the voices of the principal players. Just after I read this book I began reading Lords of Finance, a similar tale about the failure of the national bankers in the 1920's to head of the crash of '29. Both stories have a similar ring: the adults come in to restore order after the children get out of hand, but the "adults" in both cases show more underestimate the power of events and overestimate their authority. In 2008 the institutions underestimated the amount of so-called risk in the system because they could not control the financial commitments the players had made, to the tune of trillions of dollars. In the 20's, bank regulators could not control the volume of credit flowing into the US stock market from foreign sources. What does this mean? And is there any similarity to the current threat of sovereign default in the European system? If money is not the promise of something being there when a debt is called, what is the nature of money, paper or otherwise? Here we have the dilemma of modern finance: when people and governments promise wealth or social security nets it is really not the promise of something that is real, but something that is wished for, not so unlike a gambling casino. We try to set up toll booths to regulate the promise-making machines, bank regulators, government auditors, credit-rating agencies, and the like, but the institutions cannot protect us against our fantasies getting ahead of reality. That we overcommit ourselves and our institutions is not so bad, after all, because optimism is a constituent of human nature it seems. Greed likewise is hard-wired into us. It greases the wheels of commerce. I'd hate to think of a world where we were not optimists. My business would certainly fail, so would many others. I'm not seeing any grand solutions in these books, but I sure am getting a dose of reality. show less

Too big to fail - and apparently the egos of the major players are as well. This group of men - all in-bred for having worked or having dealt with each other - are quite comfortable asking each other for millions of dollars. Some come up "smelling" better than others. Their clever "instruments" helped them build a system based on promises. One of the best quotes in the book comes from a retired financier who announces that they weren't innovative for the public - the only innovation in 10 show more years that helped the public was the ATM. The story definitely reads as a journalistic "edge of your seat" thriller, written in excruciating detail. I'm glad to have a better understanding of the events and personalities of the debacle. show less

I read this book for book club but it was always on my never-ending list of books to read. The financial crisis is like a genetically compromised octopus with 100 tentacles and growing. People who understand the banking and financial industry will sail through this book. The rest of us (me!) -- though not lacking in intelligence, education, and experience -- will have a difficult time keeping track of the characters and events and coming away with a finely-attuned sense of how everything show more connects (it all does) and what lessons may have been learned (none).

The book blessedly contains a cast of characters, both home-grown and international, at the front of the book, but there were so many incestuous business relationships and intermarriage among banks and CEOs, that it may be of little use. Most readers will merely recognize names from their ubiquitous appearances in the daily news. The book also contains a very detailed bibliography and index.

Sorkin's book details the events and background during a short period of time encompassing the government's bail-out of all the investments houses except for Lehman Brothers. Yes, the book does read like a best-selling thriller, even without understanding the details. It's hard to put it down or put it out of one's mind but reading it even at the broad level at which I did will occupy a very large chunk of one's days/weeks. It's worth the effort if only to realize every diabolical and sleazy thought you've ever had about Wall Street and the evil that lurks there is more true than you could ever imagine, even if you possess an Ivy League MBA. You may even, as I did, find yourself rooting for the financial collapse of the entire banking system just so it can start all over from scratch with unforgiving enforcement of meaningful rules and regulations, sanity, and real concern for the people whose money is being played with -- notwithstanding the ensuing international crisis unlike one we've ever before witnessed. Without that, taxpayers (you and me) will be rescuing the banks and the players in perpetuity and they will continue to get rich and stay rich while they stealing from us and paying themselves obscene salaries out of money that never existed. If you read this book and then grab your backpack for an OWS protest, good for you! We need more protesters. show less

This is an always interesting description of the people and events of the financial crisis from the sale of Bear Stearns in 2008 through the passage of TARP at year end. This is not a book about the causes of the panic, nor was it meant to be.

A few things strike me.

Until TARP, the government is always reacting, trying to catch up to events. The crisis accelerates and expands and yet the response is sequential, to each event, at it happens. Because of that the reaction is ad hoc. Sell Bear show more Stearns to JP Morgan. Let Lehman fail. Take over Fannie and Freddie, but try to arrange mergers of (choose your partners) JP Morgan, Morgan Stanley, Citigroup, Wachovia, Merrill, BofA.

Because the reactions are ad hoc, the advice is often confusing and contradictory and not planned. Geithner (he does this often) tells an investment bank to “talk” to a commercial bank, meaning sell to them, but he hasn’t told the commercial bank it is the buyer. Barclays is negotiating to buy Lehman and only finds out at the end of the process the UK regulators won’t approve it.

The housing market peaked in 2006. There was a widespread recognition the housing market was in decline. And yet, Bear, Lehman, Merrill, the Feds are not adjusting to that change. The investment banks do not adjust their balance sheets to reflect the asset impairment and are either clueless of delusional about the tenuous of their liabilities. And these are the smart guys. Everyone is brilliant in a bull market. And the Feds are not looking with greater interest at the market. These are the experts we are relying on to make sure the market doesn’t get out of control?

CEO’s, CFO’s, millionaires, entrepreneurs and regulators, can be highly educated, highly experienced, highly successful and completely driven by emotion at the worst time. Exhibit A is Dick Fuld who refuses to recognize the peril he and Lehman are in until the very last minute. He is just like many of the CEOs I deal with who can’t bring themselves to raise many when they can, instead of when they need it and terms are much more onerous.

Paulson is the hero of the tale. Geithner comes across as out of his depths. Bernanke should be, but isn’t, a main player and Sheila Bair is portrayed as incompetent (probably unfair).

Near the end many events are happening simultaneously and the chapters become more disjointed as Sorkin moves from one event to another. It is a petty criticism of the book. This is an excellent account of the personalities and events of 2008.

2019-10-18 show less