Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the FinancialSystem--and Themselves [Paperback]

 

 

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New York Times writer Andrew Ross Sorkin's "Too Big To Fail" is an important book that deserves to be read by all with an interest in the competitive, clubby world of finance. The book begins just after Bear Stearns' forced takeover by JP Morgan and spans Fannie Mae and Freddie Mac's government bailouts; Lehman's collapse; Merrill Lynch's forced marriage; Washington Mutual and Wachovia's demise as independent banks; AIG's government bailout; and ends with the government's implementation of TARP (Troubled Asset Relief Program). The events are already familiar to all, but they are relayed here chronologically in gripping detail, reconstructed through countless interviews and woven together in a story so fast moving and far fetched it seems almost unbelievable.

At one point, during hastily called talks to plug a sudden $50,000,000,000 plus funding shortfall at AIG (yes, that's right, suddenly they were short about $50 billion dollars), one of the investment bankers involved does a quick calculation that his firm could make $2,500,000,000 in underwriting commissions. Is it any wonder that folks on Main Street have a deep mistrust and antipathy towards Wall Street? The whole situation seems too bizarre to even pass as fiction. In the end, AIG was sinking too quickly, and the government bailed them out; the investment banker would have to look elsewhere for a $2.5 billion fee.

Bear Stearns' collapse happened in March 2008, and Sorkin spends the first third of the book providing interesting background detail on the major players, both individuals and institutions, and letting Lehman's precarious situation build. By mid summer, events begin to unfold quickly, with the mortgage lenders Fannie and Freddie reaching crisis, and Lehman's over-leveraged position starting to look untenable. From there, it's a whirlwind of both private sector and government orchestrated meetings, phone calls, panic, solution, more panic and self preservation, and more meetings. Each and every company is both a fierce competitor and wading in the same quicksand, which adds to the fluidity of the crisis.

The cast of characters listed at the book's start runs seven pages. Lehman CEO Dick Fuld comes off particularly unsympathetically, though in the end is as much a tragic figure as villain, and SEC Chair Christopher Cox seems completely out of his depth. Treasury Secretary Hank Paulson and New York Federal Reserve Bank Chair Tim Geithner come off as incredibly hard working, capable, and action oriented. Of all the investment firms, Goldman Sachs is most interesting. Other investment banks recognize Goldman's talent, success, and position in the pecking order, but clearly don't trust them. During the crises, conflicts and apparent conflicts abound, and again Goldman seems more than the others to either skate through them or blatantly capitalize on them. With so many ex-Goldman people in both public and private leadership roles, there are inevitable references to "Government Sachs", though Sorkin does make it clear that Paulson, an ex-Goldman CEO, is keenly aware and works to minimize any appearances of conflict.

One conflict that seems to escape nearly every player is that deals, including side deals about prospective leadership roles for CEOs, are discussed and settled completely outside the normal and proper board structure. Financial companies' Boards of Directors are in most instances mere afterthoughts in this crisis fuelled, free-wheeling world of mergers and takeovers - hardly a model of corporate governance. Only in the final pages of the book do the boards play an active role. Perhaps this is because Sorkin failed to or chose not to interview many of the corporations' directors, though he does manage to describe the board dynamics during Cox's unprecedented call to the Lehman board exhorting them to file for bankruptcy. Similarly, Bernanke's presence is clearly underrepresented when compared to his actual role, again perhaps due to Sorkin's poor access to information from the Federal Reserve, or perhaps because he felt there was enough material to just focus on Treasury Secretary Paulson's role in stemming the crises. In any case, the second half of the book is Paulson's and Geithner's show.

In his epilogue, Sorkin reflects on many of the events from a policy perspective, and agrees with many critics that the government erred in letting Lehman fail, a conclusion that he appears to have reached only in hindsight given his depiction of events at the time. It's true that the repercussions were felt around the world in a way no one imagined, and Lehman was in the end the only one allowed to fail. In his excellent narrative, though, Sorkin conveys how quickly events were unfolding, how complex the issues were, how some hoped for outcomes failed to materialize, and the moral hazard the government faced. While the government did not want to provide a bailout for all troubled firms and allowed Lehman to go under, they subsequently and very quickly discovered that a massive bailout was the most palatable option.

Details about the events of 2008 are still being uncovered (for example months after the book's publication, internal emails from AIG were made public that showed some at the firm were already questioning the firm's liability exposure in 2007, a year before their liquidity crisis), but in this book Sorkin has delivered a long but gripping read, one that is sure both to edify and madden readers on Main Street.

Having waded through every not very suspenseful page of this volume, I find it puzzling that no one apparently seemed to have thought it necessary to proofread the text before it was published. I cannot recall the last time I encountered so many spelling errors, grammatical mistakes and examples of sloppy punctuation. Coupled with Mr. Sorkin's fondness for stock phrases and cliche, one comes away from the experience wondering whether some publishing houses now simply regard certain books as being too big to edit. One perception that Mr. Sorkin does confirm, perhaps rather inadvertently, is the degree of self-absorption and lack of concern for the real-world effect of their actions that seems to be the dominant character trait of every senior Wall Street figure he presents. Prices they all know, values seem less familiar.

Inside the Battle to Save Wall Street--Too Big to Fail--is a riveting account of the events leading to the financial crisis of September, 2008 in which the greatest international finance companies in the world teetered on the brink of bankruptcy.

The story is told with a humanity that makes the affairs of the powerful men and women involved understandable, and provides a blow by blow description of exactly what happened on Wall Street when suddenly trillions of dollars began evaporating into thin air, and threatened the entire system of interconnected world finance.

Andrew Ross Sorkin skillfully takes the reader into the meetings and conferences in The Federal Reserve and the great institutions of Wall Street to witness the struggle to solve a crisis that threatened to topple the global financial structure.

He has organized the chaos of uncertainty and panic that reigned, twenty four hours a day during this period, into a well told story that is truly difficult to put down.

We all hope that this incredible affair will have taught the powers that be a lesson that will guide them, not only to prevent the same thing from happening all over again, but that they will correct the grave errors that precipitated the crisis in the first place.

The rest of us ordinary mortals hope to be able to go on enjoying our ordinary lives.

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1.0 out of 5 stars Too Bad to Read
The hype created by the movie promises a quality that the book simply fails to deliver. Unfortunately for the reader, the book suffers from a "rush to publish" that left research... Read more

Published 8 months ago by Tag Canada

5.0 out of 5 stars Fly on the wall
Excellent book. Makes you feel as if you were right there as everything was happening from the Fed's to the Big players boardroom's.

Published 23 months ago by Darcy J. Neepin

5.0 out of 5 stars I couldn't put it down
I usually avoid "exposés" as the authors tend to exaggerate and overstate their case. However, it is evident that Andrew Sorkin has done in-depth research on the economic... Read more

Published on Feb 23 2010 by Jeffrey Sidel

5.0 out of 5 stars It's a warped world of greed and megalomania
Everyone lives by their own rules. Everyone has their own reality and the reality that the leaders of the American financial system is warped. Reading Mr. Read more

Published on Jan 26 2010

5.0 out of 5 stars You can't make up this stuff
I have just finished reading the book, and congratulate the author on a fascinating story. The mix of personal information on the principals involved, and the almost unbelievable... Read more

Published on Nov 24 2009 by Peter Frederick

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