Patrick Robinson (1) (1940–)

Robinson's a good writer, so it would be nice to believe the jingoism, racism and imperialism, etc. that permeates the book is the author rendering true 80's era military swank. And then you get a chapter where he extemporaneously goes off on the gloriousness of the Koch brother empire and you realize he's not rendering depth and flaws of his protagonists. Rather Robinson and his ilk of techno-thriller fanboys are too blinkered by American exceptionalism and the like to realize how stuff show more like this comes across as Team American World Police without being in on the joke. show less

Larry McDonald refers a number of times in this book to his capacity for hindsight and he certainly uses it here.

But he uses it very well in this extraordinary insider account of the spectacular downfall of Lehman Brothers, a venerable old investment bank whose demise, caused by greed, shortsightedness, arrogance, and stupidity at the very top, came close to taking the world’s economy with it.

The writing is excellent. Patrick Robinson takes the “vast jumble of thoughts cascading show more undisciplined and unchecked through [McDonald’s] mind” and turns it into an enthralling story. There were dozens of places where I marked what I thought of as good writing. If I had to pick a favourite, it would be on page 308: “The whirling, bloodstained god of galloping inflation danced mockingly across the floor of the New York Stock Exchange.”

Some passages are very technical, perhaps unavoidably so in a book like this. But I least I know the difference between stocks and bonds now.

Thoroughly recommended. If the subject interests you at all, you shouldn’t miss this. show less

Wow. This book was bad (and I don't mean baaaaad, but bad)! I'd warn you of of spoilers, but read Amazon's description and you can figure out what happens. And that's only part of the problem. There are many more:

Author Patrick Robinson obviously has great respect for Navy SEALS and has done a lot of research about them. But protagonist Mack Bedford's abilities are so overblown and cartoonish, it's hard to take him seriously. He's pretty much described as Superman without the cape. He's show more bigger, badder, stronger, faster, more ruthless than...well, anyone. Absurd. And just because Bedford was a commander in the special forces, doesn't mean he can devise what ends up being a totally foolproof plan to take out a heavily protected person, complete with multiple disguises, superhuman feats, and horrendously unbelievable coincidences.

For what is such an obvious plot line and result, it takes a helluva long time to get there. This is in part because of all the wasteful description of food preparation and news stories Robinson litters the story with. As to the latter, the reader is treated to two rather long reporter investigations into the crime. Problem is, we already know everything the reporter's uncovering, so there's absolutely no reason for it to be there. Robinson's portrayal of how the story is covered around the world is ridiculous too. Sure, the US media would cover it, but it wouldn't be wall-to-wall as he describes it.

The audio version suffers from typical melodramatic male narration (which seems to be typical of audio books). Here, Charles Leggett delivers mundane sentences like he's amped up with adrenalin. To his credit, however, he does a slew of accents quite well.

Diamondhead is awful. Don't read--or listen--to it. show less

Lawrence MacDonald, a former VP at Lehman Brothers, recounts his rise within the broker profession and the precipitous fall of Lehman brothers which he blames almost entirely on just eight people, including Richard Fuld. They were the ones promoting over-leverage and investment in risky investments such as CDOs and CDS's

It's interesting, because intentionally or not, we are given insight into MacDonald's mind and watch the erosion of ethics of his own behavior and that of those around him. show more No one sets out to destroy a company, yet the shift from interest of the investor to personal self-interest at the expense of the company has the same result. One could see this mind-set reflected in the faces of the Goldman Sachs boys during the recent hearings.

MacDonald got his start as a meat salesman who wanted to move to the big money on Wall Street. He and a friend had a brilliant idea: take prospectuses from companies issuing bonds, put them online and make them available to people with sensible advice about those bonds. Using some clever PR and a savvy programmer, the three of them created a company, Convertabond.com, at the height of the tech boom, that was soon the talk of the financial world. It also pissed off some of the bond traders because they were providing honest and candid advice about bonds. Morgan-Stanley was particularly angry because Convertabond was calling some of their bond releases for the junk they were. So Morgan Stanley bought them out and closed the site to the public. Their website now reads: "For more information on convertible securities, and current offerings, please contact your Morgan Stanley representative." Now, of course, we have congressional investigations revealing emails from both Goldman Sachs and Bear Stearns of employees at the firms disparaging the products they were selling to their clients.

MacDonald talks a lot about corporate culture, big companies filled with people who often don't know their heads from their asses and who's major skill is covering their butt. It's not a pretty picture. Basically a bunch of guys making decisions they know nothing about. After they were bought out, his partner, unable to handle the daily bullshit (meetings to prepare for meetings and hiring consultants to perform tasks requiring months which formerly the two had done in a couple of days,) quit.

The along cam the Commodities Futures Modernization Act and the repeal of Glass-Steagall, two political decisions intended to deregulate the market, but instead laid the groundwork for a repeat of 1929. MacDonald's father predicted it. "It's all crap," he told his son. The bonds which had prevented investment houses who bet with other peoples money from getting access to the funds of banks were cut. That and the CFMA's deregulation of CDOs (collateralized debt obligations,) spelled trouble. His father also saw the signs of a classic bubble. CDO's (basically a form of insurance in case a corporation should go bankrupt) were sold and collected by investment houses earning them and the banks huge fees, but also putting them on the hook for hundreds of billions should a company like CountryWide (see Chain of Blame for more detail) go belly-up. Since Countrywide's entire business plan rested on the assumption that real estate prices would continue to grow, their failure was inevitable.

And not just real estate. MacDonald became concerned when he saw that Cisco had a market capitalization of $500 billion making it the largest in the world. Their P/E ration was 160, or meaning that if they were bought out at current prices, it would take 160 years for the buyer to earn his money back. Remember, this was just before the tech bubble exploded. Soon he was a bear, shorting companies he knew were over extended, ironically using the convertible bonds he had become expert in, to acquire more capital (and debt) in an effort to stay afloat.

Then came Alan Greenspan and cheap money. Consumers embarked on an orgy of borrowing. With interest rates falling below 1%, investors had almost no choice but to not save and to look for high yield bonds. Wall Street was ready to oblige and invention of new ways to securitize debt exploded.

MacDonald describes complex financial instruments in very clear terms. For examples, a CDO, collateralized debt obligation, originated in the sale of a mortgage. The preferred were those with adjustable rates because they were very attractive to the buyer, but promised large rewards a couple of years down the road when the interest rate went to 8% or 9%. The broker could care less whether the homeowner could pay or not because the mortgages were sold to mortgage houses which then packaged them into large bundles; say 1000 mortgages of $300,000 each, or $300,000,000. Lehman Bros. would borrow money on the short-term market to buy the package. It was now a mortgage backed security, a CDO. Lehman would slice this into 300 bonds at $1,000,000 each. The rating agencies who were paid enormous fees to help design the bonds and then give them AAA ratings help t provide assurance to buyers that they were getting solid bonds backed by strong mortgages which would begin paying at 8-9%. At each step along the way, everyone collected fees and made piles of money. Of course, it meant that ultimately the mortgage on a house in California might be owned in part by an Eskimo in Iceland. Original mortgage salesmen soon realized that all they needed was a signature. No one else cared because the mortgages would be traunched up anyway. It didn't matter if the system didn't run smoothly because any complaints would get lost since the hedge funds which bought the CDOs could be on the other side of the world from the mortgagee. Presumably bad mortgages would be spread across a larger number of good loans, evening things out. Real estate had never lost more than 5% of its value in a given year since the depression. The psychology of a bubble says that this time things will be different. They weren't. Housing prices fell and soon the CDOs became junk. But insurance companies (AIG) had been brought into the picture with credit default swaps and now they were on the hook for trillions. And the house of cards fell apart.

MacDonald describes a world and culture that thrived on cheating and lying. Lawyers and accountants making millions a year inventing new "products" (remember Blankheim talking about synthetics in the hearings?) did battle obfuscating the truth as they rang rings around civil service regulators making $120,000 per year. It was an unfair fight.

William Isaac, formerly of the FDIC, in an interview I heard the other day, said that the financial "regulation" being considered is a mere band-aid and that systemic change is needed to avoid periodic economic disasters. Since the repeal of depression era regulations, we had suffered major economic calamities on average about every 10 years. That, he says, has to stop. We now have a situation where six large banks control more than 60% of the nations wealth. Too big to fail?

References: http://www.washingtonpost.com/wp-dyn/content/article/2008/09/26/AR2008092602200....

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Given the recent report in the NYTimes detailing how Lehman and its accounting firm (always adhering to those wonderful Generally Accepted Accounting Principles, i.e. help hide everything you can) managed to hide some $50 billion in bad loans from its books, I thought this might be a good time to read this book. If there is any justice in the world Ernest & Young will go the way of Enron's accounting firm, Arthur Anderson. "Charles Perkins, a spokesman for Ernst & Young, said in an e-mailed statement: 'Our last audit of the company was for the fiscal year ending Nov. 30, 2007. Our opinion indicated that Lehman’s financial statements for that year were fairly presented in accordance with Generally Accepted Accounting Principles (GAAP), and we remain of that view.' "

From the report: "Colorable claims exist that Ernst & Young did not meet professional standards, both in investigating Lee's allegations and in connection with its audit and review of Lehman's financial statements."

Reference: http://www.nytimes.com/2010/03/12/business/12lehman.html show less