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Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis — and Themselves
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 neverdisclosed 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.
“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 neverdisclosed 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.
600 pages, Hardcover
First published October 20, 2009
About the author
Andrew Ross Sorkin
8 books286 followersAndrew Ross Sorkin is The New York Timess chief mergers and acquisitions reporter and a columnist. Mr. Sorkin, a leading voice about Wall Street and corporate America, is also the editor of DealBook (nytimes.com/dealbook), an online daily financial report he started in 2001. In addition, Mr. Sorkin is an assistant editor of business and finance news, helping guide and shape the papers coverage.
Mr. Sorkin, who has appeared on NBC's Today show and on Charlie Rose on PBS, is a frequent guest host of CNBCs Squawk Box. He won a Gerald Loeb Award, the highest honor in business journalism, in 2004 for breaking news. He also won a Society of American Business Editors and Writers Award for breaking news in 2005 and again in 2006. In 2007, the World Economic Forum named him a Young Global Leader.
Mr. Sorkin began writing for The Times in 1995 under unusual circumstances: he hadnt yet graduated from high school.
Mr. Sorkin lives in Manhattan."
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May 15, 2021
“In the span of just a few months, the shape of Wall Street and the global financial system changed almost beyond recognition. Each of the former Big Five investment banks failed, was sold, or was converted into a bank holding company. Two mortgage-lending giants and the world’s largest insurer were placed under government control. And in early October [2008], with a stroke of the president’s pen, the Treasury – and by extension, American taxpayers – became part-owners in what were once the nation’s proudest financial institutions, a rescue that would have seemed unthinkable only months earlier…”
- Aaron Ross Sorkin, Too Big to Fail
Aaron Ross Sorkin’s Too Big to Fail takes you on a journey into the enchanted, fairy-tale realm of high finance. No one is quite sure what happens in this fantasyland. Those who work there are quick to state their importance to the functioning of the economy, but the main purpose is to make money, and lots of it.
One of the ways high finance accomplished this feat was to bundle up subprime mortgages into a new kind of investment security. This security could then be sold to investors, and the fees pocketed. Because this security was filled with mortgages that might possibly – and quite probably would – default, investment firms took out insurance as a hedge. Of course, the majority of all such insurance came from a single company, but la-dee-da.
Don’t understand how this all works? Don’t worry, you can be the CEO. But be warned: If you do a bad job – if you destroy your company, your shareholders, the investments of millions – you will have to face the consequences. You will be fired, and then you will be given millions of dollars in severance, apparently to remind you of the millions of dollars you lost.
As to your company? Well, there is an old debtor's trick in borrowing so much money that your creditors cannot allow you to go bankrupt. The analogue here is in becoming such an integral part of the system that even though you took massive risks, and caused massive losses, someone - perhaps even the United States Government - will rescue you.
If this setup seems a bit grotesque, sort of like the consequence-free realm inhabited by very small children, I have to warn you, you won’t like what you read in these pages. Despite being powered by magical thinking, the high financiers of Wall Street are quite real. And in 2008, just a small handful of them almost destroyed the country’s entire economy.
***
Coming off a worldwide pandemic that has killed, sickened, and frightened people in every corner of earth, not to mention utterly transforming the way that human beings interact with one another, it is easy to forget the Great Recession of 2008 (which actually started in 2007, and didn’t become an official recession until 2009). Millions of people lost their jobs, their savings, and their homes, but it was just another in a long line of financial panics that tend to erupt with disconcerting regularity. Still, for those of us who lived through it, who lost earning power, gained debt, and saw the prospect of retirement disappear, it still lingers.
Too Big to Fail is probably the most famous book to come out of this particular economic disaster. Nevertheless, it is only a very narrow look at a very broad and complicated subject. It is strictly focused on the collapse of Lehman Brothers in September of 2008, a near-catastrophic event that elicited an unprecedented – and controversial – governmental response. That response included propping up certain financial institutions whose survival was deemed vital for the overall system.
Sorkin uses this event as the foundation of a financial thriller. Written with novelistic detail, and closely following numerous individuals (the “Cast of Characters” is eight pages long), Sorkin definitely succeeds in creating a page-turner. From the beginning, I was engrossed, and despite being over 500-pages in length, I flew through it. Though you would not necessarily guess that the struggle to avoid bankruptcy makes for inherent drama, it certainly does, at least in Sorkin’s hands. Based on hundreds of interviews, Sorkin is able to place you into the posh offices, heated boardrooms, and the arched hallways of the New York Federal Reserve Building. Part of the book’s stupendously fast pace comes from the fact that much of it is dialogue, as extremely wealthy men (most are men) scream obscenities at other extremely wealthy men.
Easily the most interesting personage in this saga is Hank Paulson, a former CEO of Goldman Sachs who agreed to serve as Treasury Secretary in the last years of George W. Bush’s lame-duck presidency. Seeing this as the capstone to a career in which he had made hundreds of millions of dollars, Paulson soon found that he had gotten a lot more than he bargained for. A Republican who held traditional conservative economic principles, Paulson was hesitant to use taxpayer funds to prop up the struggling Lehman Brothers, even after using such funds to allow J.P. Morgan to acquire Bear Stearns. Paulson worked feverishly to try to find a private, non-governmental solution to Lehman’s death-spiral. Ultimately, those efforts failed, and Lehman went into bankruptcy, throwing the markets into turmoil.
Ping-ponging back and forth, as he struggled to square his anti-bailout principles with a need-for-liquidity reality, Paulson eventually favored massive governmental intervention, resulting in the Toxic Asset Relief Program (TARP). The behind-the-scenes maneuvering as Paulson – along with New York Federal Reserve President Timothy Geithner, and Federal Reserve Chairman Ben Bernanke – tried to avoid a calamity on par with the Great Depression, is fascinating. It turns out that the distance between “moral hazard” and massive bailouts is but a single short step.
Just as fascinating, and far more infuriating, are Sorkin’s portraits of the various businessmen involved. Front-and-center is Richard Fuld, foulmouthed and raging, who stood cursing in the wheelhouse of Lehman Brothers as it sank. The most remarkable thing about Fuld, and many others featured here, is just how unremarkable they appear. Sorkin is never quite able to convincingly explain why most of these guys are worth the untold millions they are paid. Many of the higherups did not even grasp the dangerously leveraged positions their firms had taken until it was all about to crumble.
***
The self-contained world of Wall Street is nothing like the reality that most Americans experience in their working lives. The amount of money that is sloshing around is truly staggering. Perhaps due to the ridiculousness of the sums involved, many of the businesspeople in Too Big to Fail have an extremely strange relationship with money. For example, in discussing Merrill Lynch CEO John Thain, Sorkin notes that Thain was known as a “cost-cutter” during his time as the head of the New York Stock Exchange. To him, this meant firing the barber. Meanwhile, at Merrill, he saves $200,000 a year by stopping fresh-cut flowers. Then, he turns around and gives a $39.4 million bonus to sign an old Goldman buddy to work at his firm. It’s so warped it beggars the imagination. Fire the barber. Put some florist out of business. Give your friend $40 million. It’s all in a day’s work. But it’s not just Thain. The Merrill CEO before Thain was given an exit package of $161.5 million. That’s what he got paid for being unsuccessful at his job. It really gives a whole new meaning to the term “failing upwards.”
***
While I liked Too Big to Fail, it is markedly flawed. For one, Sorkin seems inured to the essential ridiculousness all around him. Even when things are clearly nuts, Sorkin never interrupts the flow to point it out. Furthermore, this feels like an insider’s book, written for other insiders. Sorkin relishes the juicy quotes, and undoubtedly everyone else on Wall Street relished reading them. I got far less mileage out of the semi-gossipy tone.
The bigger issue is that the sharply delineated scope of Too Big to Fail leaves no room for context. Sorkin is almost obstinate in his refusal to provide the overall financial background in which the collapse of Lehman occurred. He provides no discussion of subprime mortgages, collateralized debt obligations, or credit default swaps. While there is plenty of salty language, there is very little explanation of important financial concepts. To take just one example, there are numerous mentions of “short selling” throughout the book. Indeed, CEO Dick Fuld went so far as to blame short selling for Lehman’s demise. Despite the importance of this stock selling tactic, and even though it would take literally two or three sentences to elucidate, Sorkin never bothers. I understand the impulse not to make this a “technical” book, but a little basic finance would have been much appreciated. Entertainment and education do not need to be mutually exclusive.
***
Too Big to Fail came out very shortly after the events it describes. Thus, it exists mainly as a snapshot of a brief moment in a larger meltdown. There is no real attempt to draw a lesson from the narrative, much less indicate a prescription for the future. In the penultimate page, Sorkin briefly espouses the need for regulations, but does so in an extremely generalized manner. Mostly, the reader is left to draw their own conclusions, or to simply shake their heads in disbelief.
- Aaron Ross Sorkin, Too Big to Fail
Aaron Ross Sorkin’s Too Big to Fail takes you on a journey into the enchanted, fairy-tale realm of high finance. No one is quite sure what happens in this fantasyland. Those who work there are quick to state their importance to the functioning of the economy, but the main purpose is to make money, and lots of it.
One of the ways high finance accomplished this feat was to bundle up subprime mortgages into a new kind of investment security. This security could then be sold to investors, and the fees pocketed. Because this security was filled with mortgages that might possibly – and quite probably would – default, investment firms took out insurance as a hedge. Of course, the majority of all such insurance came from a single company, but la-dee-da.
Don’t understand how this all works? Don’t worry, you can be the CEO. But be warned: If you do a bad job – if you destroy your company, your shareholders, the investments of millions – you will have to face the consequences. You will be fired, and then you will be given millions of dollars in severance, apparently to remind you of the millions of dollars you lost.
As to your company? Well, there is an old debtor's trick in borrowing so much money that your creditors cannot allow you to go bankrupt. The analogue here is in becoming such an integral part of the system that even though you took massive risks, and caused massive losses, someone - perhaps even the United States Government - will rescue you.
If this setup seems a bit grotesque, sort of like the consequence-free realm inhabited by very small children, I have to warn you, you won’t like what you read in these pages. Despite being powered by magical thinking, the high financiers of Wall Street are quite real. And in 2008, just a small handful of them almost destroyed the country’s entire economy.
***
Coming off a worldwide pandemic that has killed, sickened, and frightened people in every corner of earth, not to mention utterly transforming the way that human beings interact with one another, it is easy to forget the Great Recession of 2008 (which actually started in 2007, and didn’t become an official recession until 2009). Millions of people lost their jobs, their savings, and their homes, but it was just another in a long line of financial panics that tend to erupt with disconcerting regularity. Still, for those of us who lived through it, who lost earning power, gained debt, and saw the prospect of retirement disappear, it still lingers.
Too Big to Fail is probably the most famous book to come out of this particular economic disaster. Nevertheless, it is only a very narrow look at a very broad and complicated subject. It is strictly focused on the collapse of Lehman Brothers in September of 2008, a near-catastrophic event that elicited an unprecedented – and controversial – governmental response. That response included propping up certain financial institutions whose survival was deemed vital for the overall system.
Sorkin uses this event as the foundation of a financial thriller. Written with novelistic detail, and closely following numerous individuals (the “Cast of Characters” is eight pages long), Sorkin definitely succeeds in creating a page-turner. From the beginning, I was engrossed, and despite being over 500-pages in length, I flew through it. Though you would not necessarily guess that the struggle to avoid bankruptcy makes for inherent drama, it certainly does, at least in Sorkin’s hands. Based on hundreds of interviews, Sorkin is able to place you into the posh offices, heated boardrooms, and the arched hallways of the New York Federal Reserve Building. Part of the book’s stupendously fast pace comes from the fact that much of it is dialogue, as extremely wealthy men (most are men) scream obscenities at other extremely wealthy men.
Easily the most interesting personage in this saga is Hank Paulson, a former CEO of Goldman Sachs who agreed to serve as Treasury Secretary in the last years of George W. Bush’s lame-duck presidency. Seeing this as the capstone to a career in which he had made hundreds of millions of dollars, Paulson soon found that he had gotten a lot more than he bargained for. A Republican who held traditional conservative economic principles, Paulson was hesitant to use taxpayer funds to prop up the struggling Lehman Brothers, even after using such funds to allow J.P. Morgan to acquire Bear Stearns. Paulson worked feverishly to try to find a private, non-governmental solution to Lehman’s death-spiral. Ultimately, those efforts failed, and Lehman went into bankruptcy, throwing the markets into turmoil.
Ping-ponging back and forth, as he struggled to square his anti-bailout principles with a need-for-liquidity reality, Paulson eventually favored massive governmental intervention, resulting in the Toxic Asset Relief Program (TARP). The behind-the-scenes maneuvering as Paulson – along with New York Federal Reserve President Timothy Geithner, and Federal Reserve Chairman Ben Bernanke – tried to avoid a calamity on par with the Great Depression, is fascinating. It turns out that the distance between “moral hazard” and massive bailouts is but a single short step.
Just as fascinating, and far more infuriating, are Sorkin’s portraits of the various businessmen involved. Front-and-center is Richard Fuld, foulmouthed and raging, who stood cursing in the wheelhouse of Lehman Brothers as it sank. The most remarkable thing about Fuld, and many others featured here, is just how unremarkable they appear. Sorkin is never quite able to convincingly explain why most of these guys are worth the untold millions they are paid. Many of the higherups did not even grasp the dangerously leveraged positions their firms had taken until it was all about to crumble.
***
The self-contained world of Wall Street is nothing like the reality that most Americans experience in their working lives. The amount of money that is sloshing around is truly staggering. Perhaps due to the ridiculousness of the sums involved, many of the businesspeople in Too Big to Fail have an extremely strange relationship with money. For example, in discussing Merrill Lynch CEO John Thain, Sorkin notes that Thain was known as a “cost-cutter” during his time as the head of the New York Stock Exchange. To him, this meant firing the barber. Meanwhile, at Merrill, he saves $200,000 a year by stopping fresh-cut flowers. Then, he turns around and gives a $39.4 million bonus to sign an old Goldman buddy to work at his firm. It’s so warped it beggars the imagination. Fire the barber. Put some florist out of business. Give your friend $40 million. It’s all in a day’s work. But it’s not just Thain. The Merrill CEO before Thain was given an exit package of $161.5 million. That’s what he got paid for being unsuccessful at his job. It really gives a whole new meaning to the term “failing upwards.”
***
While I liked Too Big to Fail, it is markedly flawed. For one, Sorkin seems inured to the essential ridiculousness all around him. Even when things are clearly nuts, Sorkin never interrupts the flow to point it out. Furthermore, this feels like an insider’s book, written for other insiders. Sorkin relishes the juicy quotes, and undoubtedly everyone else on Wall Street relished reading them. I got far less mileage out of the semi-gossipy tone.
The bigger issue is that the sharply delineated scope of Too Big to Fail leaves no room for context. Sorkin is almost obstinate in his refusal to provide the overall financial background in which the collapse of Lehman occurred. He provides no discussion of subprime mortgages, collateralized debt obligations, or credit default swaps. While there is plenty of salty language, there is very little explanation of important financial concepts. To take just one example, there are numerous mentions of “short selling” throughout the book. Indeed, CEO Dick Fuld went so far as to blame short selling for Lehman’s demise. Despite the importance of this stock selling tactic, and even though it would take literally two or three sentences to elucidate, Sorkin never bothers. I understand the impulse not to make this a “technical” book, but a little basic finance would have been much appreciated. Entertainment and education do not need to be mutually exclusive.
***
Too Big to Fail came out very shortly after the events it describes. Thus, it exists mainly as a snapshot of a brief moment in a larger meltdown. There is no real attempt to draw a lesson from the narrative, much less indicate a prescription for the future. In the penultimate page, Sorkin briefly espouses the need for regulations, but does so in an extremely generalized manner. Mostly, the reader is left to draw their own conclusions, or to simply shake their heads in disbelief.
September 3, 2011
"The only problem with capitalism is all the capitalists.”
Herbert Hoover
There’s a school of thought out there that many, if not most, people buy into. It goes something like this: The U.S. government is full of a bunch of stupid bureaucrats who do nothing but pass restrictive laws that keep businesses from making money and prevent the growth of the economy. Obviously, the businesses should be allowed to do their thing with no government interference because they know what’s best, and if they should happen to step on their dicks, then they should just fail without the government trying to save them. To do anything else is socialism!
That’s a nice theory, but there’s a huge flaw with it. For the most part, a large business is made up of a bunch of short sighted people who will cut their own throats in the long term if it means making money next quarter. Don’t believe that? Enron. Worldcom. Tyco. AIG. Bear Stearns. Lehman Brothers. Etc. Etc. In 2001 and 2008 we saw what happens when someone doesn’t keep a close eye on the companies chasing the quick buck, and the accounting fraud of 2001 was only about ten years after the savings and loan scandals that cost the U.S. around $120 billion.
Where we really get into trouble is when these fucktards have been allowed to run amok, and then the chickens finally come home to roost. That’s when Joe or Jane Taxpayer, who a few years earlier were sitting there grumbling about the damn guvment keeping the businesses from earning an honest buck, will lose their goddamn minds over the possibility of the government providing cash to these companies to keep the entire economy from going into a death spin. They’d rather see their 401K shrink to a $1.76 rather than let those greedy bastards get a dime of taxpayer money! But no government regulation either!
So rather than holding our noses and spending $50 billion dollars to save Lehman Brothers and AIG and shore up a few other companies and then passing some sensible regulations to keep it from happening again, the government, fearing what Joe or Jane would say, tried to force a private sector solution and ultimately let Lehman go into bankruptcy. Yet after the first domino fell, the panic that spread would end up with the U.S. spending over $750 billion to try and stop another Great Depression.
This book does a great job of laying out the chaos and confusion that occurred and how we were all teetering on a brink that could have been far worse in 2008. Most of the book is just a straight retelling of the events with what the major players were thinking and what they did, but there’s a nice summary at the end that lays out what the author thinks about how it played out and does a fair job of assigning some blame.
A couple of things especially stuck out to me. When the Lehman Brothers execs realized that there would be no government bail out of them, several of them gave angry speeches denouncing the government for not doing more. I’m gonna go out on a limb and assume that a top executive at Lehman Brothers had probably been a hard core guvment-sux Republican up until the point they didn’t get a check. Oh, the irony.
The other thing that made me scratch my head was that these companies kept going back to billionaire Warren Buffet to try and get him to invest so they could raise capital. Buffett made a few half-hearted offers on things he thought he could turn a buck on. Late in the game, when TARP had been passed and the original plan was for the government to buy the toxic assets that were dragging down everyone, Buffet sent a letter to the secretary of the treasury where he laid out a plan that would have created a hybrid of a public and private company to buy up those assets, get a fair market value for them, take them off the troubled companies balance sheets and potentially provided a decent return on the tax payer money. Buffet even pledged to invest $100 million of his own money and help administer it. The plan was shelved when it was decided to invest capital in the banks, but out of all the schemes hatched over those desperate days, it seems like one of the more plausible ones.
So why in the name of Alexander Hamilton didn’t anyone ask Warren Buffett for a plan earlier? They all knew he’d been too smart to get involved in the mess that was dragging them all down. (One reading of a Lehman Brothers stock report that the industry had praised just weeks earlier convinced Buffett that he wouldn’t loan them any capital.) All of these companies tried to beg money off him, but no one asked him if he had any ideas to get them out of the mess. WTF?
Here’s the best part. It’s going to happen again. Think it can’t? There’s still been no meaningful regulations passed and I will bet a six-pack of Boulevard Pilsner that there will be yet another meltdown that will tank the economy and cost taxpayers huge before 2020. Any takers?
Herbert Hoover
There’s a school of thought out there that many, if not most, people buy into. It goes something like this: The U.S. government is full of a bunch of stupid bureaucrats who do nothing but pass restrictive laws that keep businesses from making money and prevent the growth of the economy. Obviously, the businesses should be allowed to do their thing with no government interference because they know what’s best, and if they should happen to step on their dicks, then they should just fail without the government trying to save them. To do anything else is socialism!
That’s a nice theory, but there’s a huge flaw with it. For the most part, a large business is made up of a bunch of short sighted people who will cut their own throats in the long term if it means making money next quarter. Don’t believe that? Enron. Worldcom. Tyco. AIG. Bear Stearns. Lehman Brothers. Etc. Etc. In 2001 and 2008 we saw what happens when someone doesn’t keep a close eye on the companies chasing the quick buck, and the accounting fraud of 2001 was only about ten years after the savings and loan scandals that cost the U.S. around $120 billion.
Where we really get into trouble is when these fucktards have been allowed to run amok, and then the chickens finally come home to roost. That’s when Joe or Jane Taxpayer, who a few years earlier were sitting there grumbling about the damn guvment keeping the businesses from earning an honest buck, will lose their goddamn minds over the possibility of the government providing cash to these companies to keep the entire economy from going into a death spin. They’d rather see their 401K shrink to a $1.76 rather than let those greedy bastards get a dime of taxpayer money! But no government regulation either!
So rather than holding our noses and spending $50 billion dollars to save Lehman Brothers and AIG and shore up a few other companies and then passing some sensible regulations to keep it from happening again, the government, fearing what Joe or Jane would say, tried to force a private sector solution and ultimately let Lehman go into bankruptcy. Yet after the first domino fell, the panic that spread would end up with the U.S. spending over $750 billion to try and stop another Great Depression.
This book does a great job of laying out the chaos and confusion that occurred and how we were all teetering on a brink that could have been far worse in 2008. Most of the book is just a straight retelling of the events with what the major players were thinking and what they did, but there’s a nice summary at the end that lays out what the author thinks about how it played out and does a fair job of assigning some blame.
A couple of things especially stuck out to me. When the Lehman Brothers execs realized that there would be no government bail out of them, several of them gave angry speeches denouncing the government for not doing more. I’m gonna go out on a limb and assume that a top executive at Lehman Brothers had probably been a hard core guvment-sux Republican up until the point they didn’t get a check. Oh, the irony.
The other thing that made me scratch my head was that these companies kept going back to billionaire Warren Buffet to try and get him to invest so they could raise capital. Buffett made a few half-hearted offers on things he thought he could turn a buck on. Late in the game, when TARP had been passed and the original plan was for the government to buy the toxic assets that were dragging down everyone, Buffet sent a letter to the secretary of the treasury where he laid out a plan that would have created a hybrid of a public and private company to buy up those assets, get a fair market value for them, take them off the troubled companies balance sheets and potentially provided a decent return on the tax payer money. Buffet even pledged to invest $100 million of his own money and help administer it. The plan was shelved when it was decided to invest capital in the banks, but out of all the schemes hatched over those desperate days, it seems like one of the more plausible ones.
So why in the name of Alexander Hamilton didn’t anyone ask Warren Buffett for a plan earlier? They all knew he’d been too smart to get involved in the mess that was dragging them all down. (One reading of a Lehman Brothers stock report that the industry had praised just weeks earlier convinced Buffett that he wouldn’t loan them any capital.) All of these companies tried to beg money off him, but no one asked him if he had any ideas to get them out of the mess. WTF?
Here’s the best part. It’s going to happen again. Think it can’t? There’s still been no meaningful regulations passed and I will bet a six-pack of Boulevard Pilsner that there will be yet another meltdown that will tank the economy and cost taxpayers huge before 2020. Any takers?
May 6, 2015
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 bankingscam 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!
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
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!
October 10, 2011
The strength of Sorkin’s book, which covers the period right after the fall of Bear Stearns (March 2008), up to the TARP infusions of capital (October 2008), is that he synthesized masses of detailed information and assembled it into a chronological story, using multiple firsthand accounts, contemporaneous journalistic sources, and public records. You can imagine him flipping through his enormous Rolodex (an inapt 80s allusion, but I like the image), calling every Wall Streeter he’s ever spoken to since his intern days. He goes inside Lehman CFO Erin Callan’s head (and real estate records) to find out that she borrowed $5 million on a $6.48 million condo at 15 Central Park West, designed by Robert A.M. Stern. We see the suspicious question marks circling in Warren Buffett's head as he talks with Lehman CEO Dick Fuld about possibly buying a stake in Lehman. We get Jim Cramer's point of view on a meeting with Fuld and Callan about short sellers: Fuld is hoping Cramer will talk bullish about Lehman on CNBC, but Cramer doesn't trust what they're telling him. Morgan Stanley, tasked with examining Fannie Mae and Freddie Mac’s enormous mortgage portfolios to determine how bad the damage is, ships all the data to....India, where Morgan Stanley has an “analytic center.” 1,300 employees there will pore over it. Apparently Sorkin is talking about hard copies here.
The weakness of the book is that it’s as if the entire crisis of 2008 unfolded in a vacuum, divorced from the enormous real estate bubble, mortgage frauds, toxic assets, complex derivatives, deregulation, and banker greed that caused it. Sorkin never explains the origins of the crisis in financial or macroeconomic terms, aside from the briefest sentence here and there. The securitization of mortgages, and collateralized debt obligations (CDOs), are explained in less than two pages (of a 600 page book). There are so many trees here, and we spend so much time examining bark and leaves, that I wouldn’t be surprised if many readers had no idea what the forest itself looked like. The degree of detail is about as granular and exhaustive as it gets; I think Sorkin explored every phone call, landline or cellular, that every Wall Street executive made or took during the crisis. When the executives go to their favorite restaurant, San Pietro, we find out what they ate. Sorkin never fails to tell us whether someone lands at Teterboro Airport, or Westchester.
There are juicy quotes, and some juicy gossip. We find out who hated whom. Who thinks who is really stupid. (No one thought SEC chair Christopher Cox was up to the job, and Citigroup’s Vikram Pandit doesn’t shine as luminously as some of the other bulbs.) John Thain is greedy as all get-out. Tim Geithner has six-pack abs. Hank Paulson calls his penis Herman (p. 346), which I wish I didn’t now know. At the height of the crisis Geithner was so intent on having banks merge (to solve their liquidity problems) that some CEOs began referring to him as “eHarmony.” Geithner can’t stand FDIC chairwoman Sheila Bair, who he thinks is a media grandstander, and he subtly mocks her on a conference call. At a tense emergency meeting between the Bush cabinet and Congressional leaders on the TARP plan, arguments, shouting and finger-pointing erupt; Dick Cheney watches silently, smiling.
If you actually want to know what the financial crisis was, and why it happened, read Bethany McLean’s book All the Devils are Here: The Hidden History of the Financial Crisis. Unlike Sorkin, McLean is an investigative business journalist. She tells a great story, and she underpins it thoroughly with nuts-and-bolts explanations.
The weakness of the book is that it’s as if the entire crisis of 2008 unfolded in a vacuum, divorced from the enormous real estate bubble, mortgage frauds, toxic assets, complex derivatives, deregulation, and banker greed that caused it. Sorkin never explains the origins of the crisis in financial or macroeconomic terms, aside from the briefest sentence here and there. The securitization of mortgages, and collateralized debt obligations (CDOs), are explained in less than two pages (of a 600 page book). There are so many trees here, and we spend so much time examining bark and leaves, that I wouldn’t be surprised if many readers had no idea what the forest itself looked like. The degree of detail is about as granular and exhaustive as it gets; I think Sorkin explored every phone call, landline or cellular, that every Wall Street executive made or took during the crisis. When the executives go to their favorite restaurant, San Pietro, we find out what they ate. Sorkin never fails to tell us whether someone lands at Teterboro Airport, or Westchester.
There are juicy quotes, and some juicy gossip. We find out who hated whom. Who thinks who is really stupid. (No one thought SEC chair Christopher Cox was up to the job, and Citigroup’s Vikram Pandit doesn’t shine as luminously as some of the other bulbs.) John Thain is greedy as all get-out. Tim Geithner has six-pack abs. Hank Paulson calls his penis Herman (p. 346), which I wish I didn’t now know. At the height of the crisis Geithner was so intent on having banks merge (to solve their liquidity problems) that some CEOs began referring to him as “eHarmony.” Geithner can’t stand FDIC chairwoman Sheila Bair, who he thinks is a media grandstander, and he subtly mocks her on a conference call. At a tense emergency meeting between the Bush cabinet and Congressional leaders on the TARP plan, arguments, shouting and finger-pointing erupt; Dick Cheney watches silently, smiling.
If you actually want to know what the financial crisis was, and why it happened, read Bethany McLean’s book All the Devils are Here: The Hidden History of the Financial Crisis. Unlike Sorkin, McLean is an investigative business journalist. She tells a great story, and she underpins it thoroughly with nuts-and-bolts explanations.
January 28, 2018
So I teach banking law and I assign a bunch of articles and documentaries on the crisis and I lived through it so nothing in here was new, but I wanted to read this after 10 years to see how well the narrative has aged and also because I forgot some of the play by play. This hasn't aged all that well because it's more of a financial thriller than an analysis. It's also so over the top about lionizing some of these big bad macho bankers and policymakers. Sorkin seems to have a big crush on Dimon and Paulson. He also seems to credit Fuld with a lot more good faith than I remember him exhibiting. Though Sorkin is right that Lehman probably should have been saved too. I do think it's an important read for those people who don't remember the crisis--for example, my students were in middle school. And many of them believe wholeheartedly in market discipline again. So I guess I will have to assign more and more until they realize how little stomach we had for market discipline on the brink of disaster.
September 23, 2018
I have 5 books on the 2008 financial crisis and this is the largest. However, it wasn't "Too Big to Fail". Mostly a waste of my time but I finished it and will give it 2 Stars. If you want to know what some of the people on Wall Street and a few in DC were saying and doing, you will be satisfied. You won't learn anything about what caused the financial crisis and you really don't get any detail on the plans to save the system. Just "make a plan", "give me your Plan B", "call that guy", "make a deal", "come up with a solution", blah, blah, blah. Not surprising that this guy has written a slanted, partisan account but it is more a gossip column than a useful history. He treated favored players to positive coverage - he wants to get them on as guests on his morning financial show. If you want a great explanation of the origin of the financial crisis, read The Big Short: Inside the Doomsday Machine or the first 37 pages of The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System. Not this book.
January 18, 2016
In Too Big to Fail Andrew Ross Sorkin achieved the impossible, he made the 2008 financial crisis accessible to a wide variety of readers. His tightly woven and meticulously researched narrative feels like a movie script, which is why it is no surprise that it eventually became one. Sorkin does a great job in setting out the circumstances that led to the failure of the banks, and then chronicling almost day by day the decision making process behind the eventual bailout.
One of the best financial books I've read!
One of the best financial books I've read!
October 31, 2018
The level of detail is astonishing in this comprehensive insider's look at the 2008 financial crisis including the failure of Lehman Brothers and the response of government regulators. This book will be an undeniable resource for historians in the years to come. Unfortunately that same level of detail also cripples the book somewhat, making it too unwieldy and dense to be fully appreciated by the average reader.
March 20, 2010
This was a book I felt like I had to read – 539 pages of the blow-by-blow of the financial crisis. Or at least what the crisis looked like from the top: It’s really the story of what the heads of the biggest financial firms were up to, and the federal regulators (mostly the Treasury and the Fed) who were trying to prevent the financial sector from collapse.
Mostly it just feels like reading about this chaotic charade with a bunch of crazed sleepless CEOs and lawyers and accountants trying to figure out what deals they should or should not do. It’s basically the story of the companies in worse shape (Bear Stearns, Lehman Bros., Merrill Lynch, Morgan Stanley) trying to get one of the more healthy companies (JP Morgan, Goldman, Bank of America) to buy them, or trying to get the Japanese or Koreans or Chinese investors to buy them, and trying to get the government to backstop the deal.
A lot of it adds up to this odd dance where nobody seems to know what anything is worth, and the companies in bad shape keep trying to dress up their finances as better than they are, while the companies in better shape send in a wave of lawyers and accountants to try to understand the finances in about two days. Not surprisingly, nobody can figure out anything.
The companies in worse shape keep complaining that they are being killed by short sellers who don’t understand their business, and hedge fund investors loom in the background, moving money around in huge numbers, punishing the failing firms especially hard.
Meanwhile, Hank Paulson and Tim Geithner are furiously pumping the various parties to agree to shotgun weddings to stabilize the system, convinced that if they can’t get the stronger firms to absorb the weaker ones, the entire system will collapse. They keep trying to resist demands for Treasury to guarantee assets, even though buyers keep saying that’s the only way they’ll do the deal.
All the while, nobody is getting any sleep. There are lots of calls that happen at 4 a.m. and lots of descriptions of key people looking haggard after sleeping 3 hours in four nights. Paulson vomits and/or dry heaves several times.
Also: bigwigs are constantly flying back and forth from places like Aspen and eating at fancy Manhattan restaurants.
This goes on and on. The only thing that changes is this slow building pressure in the background. Time is ticking. Confidence is vanishing. Stock prices are plummeting. And everybody is calling in their collateral, pushing all the financial firms to the brink of bankruptcy.
Ultimately, of course, the federal regulators decide that the only way to stabilize the system is to pump $700 billion of capital into the banks, a number that appears to have been drawn up somewhat randomly.
From the chaos that is reading this book, I was able to re-confirm a few basic assumptions:
1) These CEOs were all hugely arrogant assholes who have a ton of pride on the line.
2) No CEO really had any idea what exactly their companies assets looked like or seemed to have really much of an idea of what these companies were doing.
3) CEOs are obsessed with “making deals.”
4) The market is prone to panic and panic feeds more panic.
I know this book has gotten a lot of hype, but it’s not a book I’d recommend unless you want to read 500+ pages of what feels like the same basic tableau over and over again – a bunch of crazed CEOs and government regulators running around like chickens with their heads cut off, having the same conversation over and over again about how they want to do a deal but they don’t know if they can and they have no idea what the balance sheets of the companies really looks like.
It felt like Sorkin (wunderkind reporter for the NY Times) was just trying to cram in all the details he could to show how much reporting he had done. In that way, the culture of journalism is similar to the culture of Wall Street – this sort of frenetic do-everything pace that doesn’t leave any room for being thoughtful. It’s just a race, a competition. But to win what, I’m not clear.
Mostly it just feels like reading about this chaotic charade with a bunch of crazed sleepless CEOs and lawyers and accountants trying to figure out what deals they should or should not do. It’s basically the story of the companies in worse shape (Bear Stearns, Lehman Bros., Merrill Lynch, Morgan Stanley) trying to get one of the more healthy companies (JP Morgan, Goldman, Bank of America) to buy them, or trying to get the Japanese or Koreans or Chinese investors to buy them, and trying to get the government to backstop the deal.
A lot of it adds up to this odd dance where nobody seems to know what anything is worth, and the companies in bad shape keep trying to dress up their finances as better than they are, while the companies in better shape send in a wave of lawyers and accountants to try to understand the finances in about two days. Not surprisingly, nobody can figure out anything.
The companies in worse shape keep complaining that they are being killed by short sellers who don’t understand their business, and hedge fund investors loom in the background, moving money around in huge numbers, punishing the failing firms especially hard.
Meanwhile, Hank Paulson and Tim Geithner are furiously pumping the various parties to agree to shotgun weddings to stabilize the system, convinced that if they can’t get the stronger firms to absorb the weaker ones, the entire system will collapse. They keep trying to resist demands for Treasury to guarantee assets, even though buyers keep saying that’s the only way they’ll do the deal.
All the while, nobody is getting any sleep. There are lots of calls that happen at 4 a.m. and lots of descriptions of key people looking haggard after sleeping 3 hours in four nights. Paulson vomits and/or dry heaves several times.
Also: bigwigs are constantly flying back and forth from places like Aspen and eating at fancy Manhattan restaurants.
This goes on and on. The only thing that changes is this slow building pressure in the background. Time is ticking. Confidence is vanishing. Stock prices are plummeting. And everybody is calling in their collateral, pushing all the financial firms to the brink of bankruptcy.
Ultimately, of course, the federal regulators decide that the only way to stabilize the system is to pump $700 billion of capital into the banks, a number that appears to have been drawn up somewhat randomly.
From the chaos that is reading this book, I was able to re-confirm a few basic assumptions:
1) These CEOs were all hugely arrogant assholes who have a ton of pride on the line.
2) No CEO really had any idea what exactly their companies assets looked like or seemed to have really much of an idea of what these companies were doing.
3) CEOs are obsessed with “making deals.”
4) The market is prone to panic and panic feeds more panic.
I know this book has gotten a lot of hype, but it’s not a book I’d recommend unless you want to read 500+ pages of what feels like the same basic tableau over and over again – a bunch of crazed CEOs and government regulators running around like chickens with their heads cut off, having the same conversation over and over again about how they want to do a deal but they don’t know if they can and they have no idea what the balance sheets of the companies really looks like.
It felt like Sorkin (wunderkind reporter for the NY Times) was just trying to cram in all the details he could to show how much reporting he had done. In that way, the culture of journalism is similar to the culture of Wall Street – this sort of frenetic do-everything pace that doesn’t leave any room for being thoughtful. It’s just a race, a competition. But to win what, I’m not clear.
March 12, 2019
It was very interesting as well as enlightening read! More will told by the native readers but as fas as my own perception about the book is concerned, I got a lot to learn and understand about the functioning of USA economy and the big time players who influence the system.
February 24, 2010
Finished -- I imagine this book would be a tough read, since it's pages literally crawl with minor characters -- bankers, minions of the armies of the night... but it makes a good listen -- Paulson comes off much better than Bernanke or Geithner -- and the author tries (against Taibi) to rehabilitate Goldman. He makes the case, persuasively, imo -- against the Vampire-Squid conspiracists -- that the media really didn't and doesn't understand how close Goldman itself came to failing (-- so much for the myth of the all-powerful Goldman). Had Morgan failed, Goldman would certainly have been next... (obviously, Citi would have gone... perhaps earlier...., but that wouldn't have been allowed to happen; and Citi, of course, had a different status from Goldman, being a bank).
The book is full of interesting anecdotes -- and offers a fairly convincing portrait of the the modern 21st century conditorii. It thus has sociological, as well as financial interest.
Now that I've learned to love and embrace drive-time, I'm going to try to finish Lords of Finance.
(My current audible (drive-time) -- really well told -- even has me feeling sympathy for Dick Fuld and Hank Paulson...)
The book is full of interesting anecdotes -- and offers a fairly convincing portrait of the the modern 21st century conditorii. It thus has sociological, as well as financial interest.
Now that I've learned to love and embrace drive-time, I'm going to try to finish Lords of Finance.
(My current audible (drive-time) -- really well told -- even has me feeling sympathy for Dick Fuld and Hank Paulson...)
February 7, 2023
“At its core Too Big to Fail is a chronicle of failure - a failure that brought the world to its knees and raised questions about the very nature of capitalism. It is an intimate portrait of the dedicated and often baffled individuals who struggled… to spare the world and themselves an even more calamitous outcome. It would be comforting to say that all the characters depicted in this book were able to cast aside their own concerns… and join together to prevent the worse from happening. But as you’ll see, in making their decisions, they were not immune to the fierce rivalries and power grabs that are part of the long-established cultures on Wall Street and in Washington. In the end this drama is a human one, a tale about the fallibility of people who thought they themselves were too big to fail.”
This book follows the key people and businesses involved in the 2008 Financial Crisis. It goes into the details of conversations, conference calls, executive-level meetings, deals that almost took place, and who said what. It documents the sequence of events from the time of the initial warning bells, the fall of Bear Stearns, and ends with the “bailout” and its immediate aftermath. It takes the reader behind the scenes of the financial markets and is based upon hundreds of interviews. Published in 2009, it does not analyze the reasons behind the collapse, other than at a very high level.
The author focuses in on Lehman Brothers and, to a lesser extent, on American International Group (AIG) as the centerpiece of the narrative. There is a very large cast of characters (a helpful list is provided), which can occasionally be a bit overwhelming, but overall, I found it an easy-to-follow, page-turning chronicle. Sorkin sticks to the facts with little editorializing. It contains plenty of business and financial jargon and could have benefited from a bit more explanation for those not fully versed in these topics. It is a lengthy book (over 600 pages) and I think a few details (such as who drinks what types of beverages), could have been eliminated and not lost any of the important information. Recommended to anyone with a desire to understand the chain of events during the Financial Crisis.
This book follows the key people and businesses involved in the 2008 Financial Crisis. It goes into the details of conversations, conference calls, executive-level meetings, deals that almost took place, and who said what. It documents the sequence of events from the time of the initial warning bells, the fall of Bear Stearns, and ends with the “bailout” and its immediate aftermath. It takes the reader behind the scenes of the financial markets and is based upon hundreds of interviews. Published in 2009, it does not analyze the reasons behind the collapse, other than at a very high level.
The author focuses in on Lehman Brothers and, to a lesser extent, on American International Group (AIG) as the centerpiece of the narrative. There is a very large cast of characters (a helpful list is provided), which can occasionally be a bit overwhelming, but overall, I found it an easy-to-follow, page-turning chronicle. Sorkin sticks to the facts with little editorializing. It contains plenty of business and financial jargon and could have benefited from a bit more explanation for those not fully versed in these topics. It is a lengthy book (over 600 pages) and I think a few details (such as who drinks what types of beverages), could have been eliminated and not lost any of the important information. Recommended to anyone with a desire to understand the chain of events during the Financial Crisis.
August 24, 2015
If any book from the past several years that has emerged to have critical acclaim across the broad swath of American society from that cottage industry of economic doomsday books, it's this one. Andrew Ross Sorkin's Too Big to Fail is the crowning achievement of them all, appearing on several "need-to-read" lists for the controversial economic shindig that eclipsed so much of the last year's of the Bush administration.
Than why does it come off like the economic and political thriller version of a Dan Brown novel?
This book chronicles the "behind the scenes" action during what could be termed Wall Street's annus horriblis, 2008. In that year the bubble boom time burst in a big way, and without government intervention, our whole economy would crumble and we'd be living in a Mad-Max capitalist dystopia. Assembled from oral recollections, and a library of primarily documents, Too Big to Fail is a 'who was where, when' of the economic crisis.
The book has a lot going for it actually, and it's easy to see where the lauded praise comes from. The prose is immensely readable, aside from some problem sentences in several areas, Sorkin has an excellent style. He is not boring, he's positively entertaining. That's not something you can say about most books like this. It's a bit lengthy, clocking in at over 500 pages, but those pages will just fly by.
Sorkin ultimately fails. He rarely talks about the ever-burning question of "why?" that should be asked around every corner. There is little to no explanation of the economic forces at work during those times. Sorkin, at best, will give two sentences of description to what is actually going on. For the most part, the economic calamity crashing down around Wall Street is portrayed as some kind of economic natural disaster, brought on my mysterious god-like forces whom the CEOs and executives have no control or agency over. I find it hard to believe this is an innocent mistake on the part of a high-profile business reporter like Sorkin.
Instead what you actually get is the literary equivalent of being roofied and Sorkin pushing the back of your head ever so slowly into a large pile of excrement. If you read nearly any other book on the crisis, it reveals those big investment banks had a heavy hand in setting up their very own demise. I mean, throughout the book, those same banks had all these bad and toxic assets dragging them down, or cooked their books, or did a number of incredibly unethical and sketchy things to make a couple of (hundred million) bucks. But in the narrative Sorkin is loathe to make this connection. In fact, the closest thing the narrative has to a big bad is the hedge fund short-sellers the CEOs bemoan is running them out of business.
Which belies the core problem of the book. Those turbulent days of 2008 is constantly referenced as an actual natural disaster. The crisis is referred to as a cancer, a tsunami, an earthquake, a disease, among other adjectives that belong in some tawdry, tepid action thriller. Couple this with the complete lack of context and explanation of where this all originated from and it just comes off trying to hard to absolve those of actions.
Then there's the fact the book is filled with entirely irrelevant information. The personal feelings of some execs towards other, the high school drama involved in running a high-stakes, high-profit investment bank, what restaurants they dine at, what cares they drive, etc etc. The entire book is filled with enough details you could've sworn Sorkin was writing the HBO movie adaptation at the same time. Do I need to know that some execs think that the CEO of JP Morgan Chase looks in shape for someone his age? Or that Tim Geitner has a six pack? No, but like the Wall Street version of People magazine or Seventeen magazine, Sorkin dutifully chronicles it and not the economic train wreck some of those same people put us in.
It doesn't help Sorkin sets this book up like a thriller too. There's no table of contents and chapters are titled numerically. It looks and reads like a novel as well. There are settings, scenes and we often following characters about their day. There's also a distressingly high number of quotes and conversations. Sorkin takes pains to say he's reconstructed these conversations to the sources' best recollections. I find this suspect for a few reasons. No one remembers everything perfectly and we often reconstruct our memories to paint ourselves in the best possible light. The dialogue reads too much like a novel or too cinematic to have actually happened accurately. This accounts for the readability of the book, but it loses a sense of accuracy and reportage. People talk first draft after all. Plus, Sorkin makes section or chapter breaks on an overly dramatic cliffhanger. This is a writing technique one of my old English teachers would called the "Dan Brown School of Writing."
The other thing to consider is, this came out in 2009, a year after the events covered in the book. A year where the bankers and government officials were about as popular as a witch in old-timey Puritan Salem. I sincerely doubt any oral recollections are as truthful as it claims.
In all honesty there are a slew of better books explaining the financial crisis of 2008. And all of them do a better job of it than someone who is, to borrow a phrase from Taibbi, a "shameless, ball-gargling prostitute of Wall Street." As much as I dislike Taibbi's grandiosity and hyperbole, after reading this book, I think I'll cede him this one.
Than why does it come off like the economic and political thriller version of a Dan Brown novel?
This book chronicles the "behind the scenes" action during what could be termed Wall Street's annus horriblis, 2008. In that year the bubble boom time burst in a big way, and without government intervention, our whole economy would crumble and we'd be living in a Mad-Max capitalist dystopia. Assembled from oral recollections, and a library of primarily documents, Too Big to Fail is a 'who was where, when' of the economic crisis.
The book has a lot going for it actually, and it's easy to see where the lauded praise comes from. The prose is immensely readable, aside from some problem sentences in several areas, Sorkin has an excellent style. He is not boring, he's positively entertaining. That's not something you can say about most books like this. It's a bit lengthy, clocking in at over 500 pages, but those pages will just fly by.
Sorkin ultimately fails. He rarely talks about the ever-burning question of "why?" that should be asked around every corner. There is little to no explanation of the economic forces at work during those times. Sorkin, at best, will give two sentences of description to what is actually going on. For the most part, the economic calamity crashing down around Wall Street is portrayed as some kind of economic natural disaster, brought on my mysterious god-like forces whom the CEOs and executives have no control or agency over. I find it hard to believe this is an innocent mistake on the part of a high-profile business reporter like Sorkin.
Instead what you actually get is the literary equivalent of being roofied and Sorkin pushing the back of your head ever so slowly into a large pile of excrement. If you read nearly any other book on the crisis, it reveals those big investment banks had a heavy hand in setting up their very own demise. I mean, throughout the book, those same banks had all these bad and toxic assets dragging them down, or cooked their books, or did a number of incredibly unethical and sketchy things to make a couple of (hundred million) bucks. But in the narrative Sorkin is loathe to make this connection. In fact, the closest thing the narrative has to a big bad is the hedge fund short-sellers the CEOs bemoan is running them out of business.
Which belies the core problem of the book. Those turbulent days of 2008 is constantly referenced as an actual natural disaster. The crisis is referred to as a cancer, a tsunami, an earthquake, a disease, among other adjectives that belong in some tawdry, tepid action thriller. Couple this with the complete lack of context and explanation of where this all originated from and it just comes off trying to hard to absolve those of actions.
Then there's the fact the book is filled with entirely irrelevant information. The personal feelings of some execs towards other, the high school drama involved in running a high-stakes, high-profit investment bank, what restaurants they dine at, what cares they drive, etc etc. The entire book is filled with enough details you could've sworn Sorkin was writing the HBO movie adaptation at the same time. Do I need to know that some execs think that the CEO of JP Morgan Chase looks in shape for someone his age? Or that Tim Geitner has a six pack? No, but like the Wall Street version of People magazine or Seventeen magazine, Sorkin dutifully chronicles it and not the economic train wreck some of those same people put us in.
It doesn't help Sorkin sets this book up like a thriller too. There's no table of contents and chapters are titled numerically. It looks and reads like a novel as well. There are settings, scenes and we often following characters about their day. There's also a distressingly high number of quotes and conversations. Sorkin takes pains to say he's reconstructed these conversations to the sources' best recollections. I find this suspect for a few reasons. No one remembers everything perfectly and we often reconstruct our memories to paint ourselves in the best possible light. The dialogue reads too much like a novel or too cinematic to have actually happened accurately. This accounts for the readability of the book, but it loses a sense of accuracy and reportage. People talk first draft after all. Plus, Sorkin makes section or chapter breaks on an overly dramatic cliffhanger. This is a writing technique one of my old English teachers would called the "Dan Brown School of Writing."
The other thing to consider is, this came out in 2009, a year after the events covered in the book. A year where the bankers and government officials were about as popular as a witch in old-timey Puritan Salem. I sincerely doubt any oral recollections are as truthful as it claims.
In all honesty there are a slew of better books explaining the financial crisis of 2008. And all of them do a better job of it than someone who is, to borrow a phrase from Taibbi, a "shameless, ball-gargling prostitute of Wall Street." As much as I dislike Taibbi's grandiosity and hyperbole, after reading this book, I think I'll cede him this one.
June 14, 2012
For the lay person looking to learn the basics about the events that unfolded during the subprime mortgage crisis, I actually recommend the HBO original film based on this book ahead of the book itself. Whereas the movie had several illuminating scenes that put the events into vernacular for someone like me, I found that the book was a bit too hard to grasp. Not for lack of effort, as Sorkin is not prone to speaking over anyone's head. Rather, the material is so dense, and the factors so similar (derivatives, credit swaps, etc) that the book-format made it tougher to keep track of what actually happened. In the end, I came out the other end wanting to see the movie again to clarify what I had just read.
That said, I do think this is an excellent book in several respects. One of my favorite aspects of the book is Sorkin's obvious fascination with the back-stories of the high-powered executives at these banks. I was intrigued to learn just how many of the CEOs, CFOs, and COOs were actually blue-collar, non-Ivy Leaguers with a chip on their shoulder, rather than the entitled legacy employees who swell the mid-level ranks and the lesser board positions. I also think that anyone with even an intermediate understanding of finance would greatly benefit from reading this book.
My only complaint is thus something that was out of Sorkin's hands- namely, that the material was tough to grasp.
That said, I do think this is an excellent book in several respects. One of my favorite aspects of the book is Sorkin's obvious fascination with the back-stories of the high-powered executives at these banks. I was intrigued to learn just how many of the CEOs, CFOs, and COOs were actually blue-collar, non-Ivy Leaguers with a chip on their shoulder, rather than the entitled legacy employees who swell the mid-level ranks and the lesser board positions. I also think that anyone with even an intermediate understanding of finance would greatly benefit from reading this book.
My only complaint is thus something that was out of Sorkin's hands- namely, that the material was tough to grasp.
December 31, 2009
This book is a great feat of reporting - Sorkin conducted thousands of hours of interviews and obviously put a lot of research into reconstructing all the events surrounding the meltdown on wallstreet in 2008. The book focuses on the Lehman bankruptcy, and then focuses on how the US Treasury and the Fed eventually developed TARP to stabilize the financial/credit markets.
So, the book effectively reads like: "X happened, so Y CEO called Z CEO, who then called Hank Paulson, who then conferenced in Bernanke and Geithner, who then said Z, which prompted Y CEO to do A, while Z CEO attempted to merge with Bank A, which caused CEO Y to throw a shit fit ...."
And on and on and on.
For all its exhaustive reporting, the book is incredibly light on analysis. The book reports pretty much everything that happened, while saying remarkably little about why it happened, what it means, how we go here, and where we might go next.
I suppose the book is meant to be more reporting and less analysis, but the book is so heavily weighted towards the former that it really detracts from the gravity of the final product.
I guess we'll have to wait a few years for some meaningful works of analysis to emerge.
So, the book effectively reads like: "X happened, so Y CEO called Z CEO, who then called Hank Paulson, who then conferenced in Bernanke and Geithner, who then said Z, which prompted Y CEO to do A, while Z CEO attempted to merge with Bank A, which caused CEO Y to throw a shit fit ...."
And on and on and on.
For all its exhaustive reporting, the book is incredibly light on analysis. The book reports pretty much everything that happened, while saying remarkably little about why it happened, what it means, how we go here, and where we might go next.
I suppose the book is meant to be more reporting and less analysis, but the book is so heavily weighted towards the former that it really detracts from the gravity of the final product.
I guess we'll have to wait a few years for some meaningful works of analysis to emerge.
August 9, 2013
This book made me mighty mad, not only at the despicable characters portrayed in it, but at the author for his adoring, fawning approach to them. More than once I slammed the book down, only to force myself back to it a week or two later. And for that persistence I was rewarded---ever so slightly---by Sorkin daring to approximate analysis in an afterword.
To judge by this book, Sorkin never met a Wall Street bigshot he didn’t worship. But worse, his journalistic style is so overloaded with trivial quotations and careful notations about who made the phone call to whom or what staircase the competing bank execs used to get to their meeting that the reader (this reader, anyway) comes away thinking Sorkin is desperate to have us believe he---Sorkin---is extraordinarily trusted by these perfumed princes, and, worse, is their soul brother.
He has an annoying penchant for making a mega-bank vice president’s walk down a New York City sidewalk to an expensive restaurant sound heroic, especially if it ends in f-word locker-room tough guy language over expensive French wine.
I felt I HAD to read this book if for no other reason that it chronicled a big moment in American history. Where’s my barf bag?
To judge by this book, Sorkin never met a Wall Street bigshot he didn’t worship. But worse, his journalistic style is so overloaded with trivial quotations and careful notations about who made the phone call to whom or what staircase the competing bank execs used to get to their meeting that the reader (this reader, anyway) comes away thinking Sorkin is desperate to have us believe he---Sorkin---is extraordinarily trusted by these perfumed princes, and, worse, is their soul brother.
He has an annoying penchant for making a mega-bank vice president’s walk down a New York City sidewalk to an expensive restaurant sound heroic, especially if it ends in f-word locker-room tough guy language over expensive French wine.
I felt I HAD to read this book if for no other reason that it chronicled a big moment in American history. Where’s my barf bag?
March 16, 2011
An excellent chronicle of the fiasco of 2008. This is a sympathetic group portrait of the major players in the financial crisis. Their failures and success are not as important as their desperate efforts to avert something catastrophic. One should always be reminded of the excellent quote in the end of the book by Theodore Roosevelt's speech in Sorbonne in 1910:
"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. "
"It is not the critic who counts; not the man who points out how the strong man stumbles, or where the doer of deeds could have done them better. The credit belongs to the man who is actually in the arena, whose face is marred by dust and sweat and blood; who strives valiantly; who errs, who comes short again and again, because there is no effort without error and shortcoming; but who does actually strive to do the deeds; who knows great enthusiasms, the great devotions; who spends himself in a worthy cause; who at the best knows in the end the triumph of high achievement, and who at the worst, if he fails, at least fails while daring greatly, so that his place shall never be with those cold and timid souls who neither know victory nor defeat. "
April 16, 2011
The tag 'Master Storyteller', should be applied to Andrew Ross Sorkin for this piece of work. It has been a while since a book captured my attention so well as this one did.
Sorkin is able to cover the 'history' of the financial crisis in a good amount of depth, switch back and forth between the different 'stages' and bring out the personalities of the key players such as the investment bank CEOs, the NY Fed and the Treasury while at the same time providing enough information about the complicated financial instruments that were at the center of the crisis.
Key Takeaways:
1. No one is too big to fail - these venerable wall street institutions were regarded as 'rock solid', but they were operating on shaky foundations.
2. Use credit carefully - credit is good when exercised with caution and
always prepare for a worst-case scenario. In fact, re-examine your assumptions of a worst-case scenario on a regular basis.
Memorable picture from the book: Picture of the check for $9B from Mitsubishi UJF financial group to Morgan Stanley to help them with their liquidity crisis and prevent another collapse.
Sorkin is able to cover the 'history' of the financial crisis in a good amount of depth, switch back and forth between the different 'stages' and bring out the personalities of the key players such as the investment bank CEOs, the NY Fed and the Treasury while at the same time providing enough information about the complicated financial instruments that were at the center of the crisis.
Key Takeaways:
1. No one is too big to fail - these venerable wall street institutions were regarded as 'rock solid', but they were operating on shaky foundations.
2. Use credit carefully - credit is good when exercised with caution and
always prepare for a worst-case scenario. In fact, re-examine your assumptions of a worst-case scenario on a regular basis.
Memorable picture from the book: Picture of the check for $9B from Mitsubishi UJF financial group to Morgan Stanley to help them with their liquidity crisis and prevent another collapse.
March 26, 2023
There are few people alive today that experienced the onset of the Great Depression nor seeing reactions in real time or the in-depth analysis of financiers, pundits, government officials, and politicians however that isn’t the case for the beginning of the Great Recession. 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 that provides an overview of the 2007-8 financial crisis from the aftermath of the sale of Bear Stearns to the creation of TARP.
The main figures throughout the book are Treasury Secretary Henry ‘Hank’ Paulson and his staff, Fed Chair Ben Bernanke, and President of the Federal Reserve Bank of New York Tim Geithner though throughout the first half of the book the major secondary figure was Lehman Brothers CEO Dick Fuld. While Sorkin covers all the threads of the slowly deteriorating of the economic environment, it’s Fuld and Lehman Brothers that is focus due to their bankruptcy leading to one of---if the most---tumultuous weeks on Wall Street, in Washington, and around the world in financial history. Let’s be clear, there are no heroes presented just people finding their worldviews getting a serious reality check as they stare into the abyss. Through Fuld is in no way a sympathetic individual, Sorkin’s writing does make him a tragic figure whose efforts to save his company were at times undermined by his own brash bravado to the point that in the end his subordinates cut him out of the increasingly futile efforts to save the company. Though originally written and published a little over a year after the dark days of September and October 2008, there is some fuzziness on the state of the world then when viewed 15 years later and the afterworld written for this 10th anniversary edition only shows a little of the long-term effects and aftershocks that are affecting the world today.
Too Big to Fail chronicles the inside story of how the financial system imploded even as Wall Street and Washington struggled to save it. Andrew Ross Sorkin portrays the situation in understandable terms and presents the participants as people struggling against a situation that undermines their preconceived notions without prejudice or favor.
The main figures throughout the book are Treasury Secretary Henry ‘Hank’ Paulson and his staff, Fed Chair Ben Bernanke, and President of the Federal Reserve Bank of New York Tim Geithner though throughout the first half of the book the major secondary figure was Lehman Brothers CEO Dick Fuld. While Sorkin covers all the threads of the slowly deteriorating of the economic environment, it’s Fuld and Lehman Brothers that is focus due to their bankruptcy leading to one of---if the most---tumultuous weeks on Wall Street, in Washington, and around the world in financial history. Let’s be clear, there are no heroes presented just people finding their worldviews getting a serious reality check as they stare into the abyss. Through Fuld is in no way a sympathetic individual, Sorkin’s writing does make him a tragic figure whose efforts to save his company were at times undermined by his own brash bravado to the point that in the end his subordinates cut him out of the increasingly futile efforts to save the company. Though originally written and published a little over a year after the dark days of September and October 2008, there is some fuzziness on the state of the world then when viewed 15 years later and the afterworld written for this 10th anniversary edition only shows a little of the long-term effects and aftershocks that are affecting the world today.
Too Big to Fail chronicles the inside story of how the financial system imploded even as Wall Street and Washington struggled to save it. Andrew Ross Sorkin portrays the situation in understandable terms and presents the participants as people struggling against a situation that undermines their preconceived notions without prejudice or favor.
August 6, 2015
Andrew Ross Sorkin's "Too Big to Fail" should frighten and enrage readers, and, for some, it probably will, but for a majority of readers, it will fall into that "grand systemic changes need to be made, but I (an average person) can't do anything to change it" mentality that cripples many of us into petrification and denial. Our heads go back in the sand, and we go about our daily lives as if we didn't have this looming storm over our shoulders.
Unfortunately, if history has taught us anything (not that we're listening), there will be a day of reckoning, and it won't be pretty.
Ever since mankind developed a system of brokering goods and services and created a monetary system, there have been the haves and the have-nots.
Throughout history, there have been periods where the haves (by virtue of the fact that they possess the wealth, whereas wealth = power) manipulate, use, and abuse the have-nots to the point that the have-nots (by virtue of the fact that they possess the numbers, whereas numbers = strength) have no choice but to rise up against the have-nots, usually resulting in violence.
Of course, the cycle simply starts anew, and what has happened before will happen again. and again. and again...
President Barack Obama, quoted in the afterword, sums it up nicely: "The people on Wall Street still don't get it. They don't get it. They're still puzzled: Why is it that people are mad at the banks? Well, let's see. You guys are drawing down ten-, twenty-million-dollar bonuses after America went through the worst economic year that it's gone through in decades, and you guys caused the problem. And we've got ten percent unemployment. Why do you think people might be a little frustrated?"
While Obama's words may resonate with many people, the fact that he and everyone else in Washington, D.C. have still done nothing substantial to solve the problem makes the sentiment seem a bit disingenuous.
Maybe it's because many of these people in Washington find themselves in the pockets of these Wall Streeters (the haves), and they don't want to solve the problem for fear of losing the pocket, while the rest of us (the have-nots) continue to struggle daily to make ends meet.
In one poignant scene in the book, President George W. Bush allegedly asked Henry Paulson, Secretary of the Treasury, the question, "How did we get here?"
His question goes unanswered.
Sorkin attempts to answer that loaded question somewhat successfully in "Too Big to Fail", an in-depth reportage of the 2008 banking collapse, starting with the failed attempt to save Lehman Bros. that started a domino effect that many people believed would result in the failure of many more banks, resulting in a Depression that would surpass the one in the '30s, thus leading to the government's intervention and the unpopular bailouts, which (depending on one's perspective) either saved us or simply postponed the inevitable.
Basing his book on thousands of interviews, memorandum, transcripts, e-mails, audio and video recordings, news articles, and public records, Sorkin has written a non-fiction account that, at times, reads like fiction. By that I mean it's almost too unbelievable at times, but it actually happened.
Sorkin attempts to answer the question, "How did we get here?" by illustrating the ridiculously lavish spending by the Wall Streeters who made millions on extremely risky mortgage loans (the subprime, or "predatory" loans that enabled many people to buy homes that they couldn't afford) during the housing bubble as well as high-risk investment products called collateralized debt obligations (CDOs), which Sorkin doesn't really define in very clear terms, but, to be fair, no one has ever defined it in clear terms.
Even former Federal Reserve chairman Alan Greenspan, a guy with dozens of important letters after his name and is considered the Stephen Hawking of economics, doesn't fully understand them: "...[S]ome of the instruments that were going into CDOs bewilders me. I didn't understand what they were doing...And I figured if I didn't understand it and I had access to a couple hundred PhDs, how the rest of the world is going to understand it sort of bewildered me."
Essentially, things had gotten so overwhelming and investments were tied up in so many different things, that once Lehman Bros. fell, it threatened to topple the entire system like a house of cards, unless the government stepped in to inject several billion dollars (of taxpayer money, mind you) to keep it standing.
And that's exactly what happened, but not all at once.
As Sorkin describes, it was down to the wire as Paulson and Timothy Geitner---at the time, president of the Federal Reserve Bank of New York---puppeteered the strings of Wall Street and government to get things done. If there are any "heroes" in this disturbing story of greed and corruption, I suppose Paulson and Geitner would be the best choice.
As someone who does not know much about the inner workings of Wall Street or even economics in general, I still found "Too Big to Fail" fascinating. I would have liked some more explanation of things mentioned (hell, a glossary might have even been handy), but I don't think it hurt my understanding of the main points Sorkin was trying to make.
Unfortunately, if history has taught us anything (not that we're listening), there will be a day of reckoning, and it won't be pretty.
Ever since mankind developed a system of brokering goods and services and created a monetary system, there have been the haves and the have-nots.
Throughout history, there have been periods where the haves (by virtue of the fact that they possess the wealth, whereas wealth = power) manipulate, use, and abuse the have-nots to the point that the have-nots (by virtue of the fact that they possess the numbers, whereas numbers = strength) have no choice but to rise up against the have-nots, usually resulting in violence.
Of course, the cycle simply starts anew, and what has happened before will happen again. and again. and again...
President Barack Obama, quoted in the afterword, sums it up nicely: "The people on Wall Street still don't get it. They don't get it. They're still puzzled: Why is it that people are mad at the banks? Well, let's see. You guys are drawing down ten-, twenty-million-dollar bonuses after America went through the worst economic year that it's gone through in decades, and you guys caused the problem. And we've got ten percent unemployment. Why do you think people might be a little frustrated?"
While Obama's words may resonate with many people, the fact that he and everyone else in Washington, D.C. have still done nothing substantial to solve the problem makes the sentiment seem a bit disingenuous.
Maybe it's because many of these people in Washington find themselves in the pockets of these Wall Streeters (the haves), and they don't want to solve the problem for fear of losing the pocket, while the rest of us (the have-nots) continue to struggle daily to make ends meet.
In one poignant scene in the book, President George W. Bush allegedly asked Henry Paulson, Secretary of the Treasury, the question, "How did we get here?"
His question goes unanswered.
Sorkin attempts to answer that loaded question somewhat successfully in "Too Big to Fail", an in-depth reportage of the 2008 banking collapse, starting with the failed attempt to save Lehman Bros. that started a domino effect that many people believed would result in the failure of many more banks, resulting in a Depression that would surpass the one in the '30s, thus leading to the government's intervention and the unpopular bailouts, which (depending on one's perspective) either saved us or simply postponed the inevitable.
Basing his book on thousands of interviews, memorandum, transcripts, e-mails, audio and video recordings, news articles, and public records, Sorkin has written a non-fiction account that, at times, reads like fiction. By that I mean it's almost too unbelievable at times, but it actually happened.
Sorkin attempts to answer the question, "How did we get here?" by illustrating the ridiculously lavish spending by the Wall Streeters who made millions on extremely risky mortgage loans (the subprime, or "predatory" loans that enabled many people to buy homes that they couldn't afford) during the housing bubble as well as high-risk investment products called collateralized debt obligations (CDOs), which Sorkin doesn't really define in very clear terms, but, to be fair, no one has ever defined it in clear terms.
Even former Federal Reserve chairman Alan Greenspan, a guy with dozens of important letters after his name and is considered the Stephen Hawking of economics, doesn't fully understand them: "...[S]ome of the instruments that were going into CDOs bewilders me. I didn't understand what they were doing...And I figured if I didn't understand it and I had access to a couple hundred PhDs, how the rest of the world is going to understand it sort of bewildered me."
Essentially, things had gotten so overwhelming and investments were tied up in so many different things, that once Lehman Bros. fell, it threatened to topple the entire system like a house of cards, unless the government stepped in to inject several billion dollars (of taxpayer money, mind you) to keep it standing.
And that's exactly what happened, but not all at once.
As Sorkin describes, it was down to the wire as Paulson and Timothy Geitner---at the time, president of the Federal Reserve Bank of New York---puppeteered the strings of Wall Street and government to get things done. If there are any "heroes" in this disturbing story of greed and corruption, I suppose Paulson and Geitner would be the best choice.
As someone who does not know much about the inner workings of Wall Street or even economics in general, I still found "Too Big to Fail" fascinating. I would have liked some more explanation of things mentioned (hell, a glossary might have even been handy), but I don't think it hurt my understanding of the main points Sorkin was trying to make.
May 30, 2023
This book is an exhaustive account of everything that went on at Treasury, the Federal Reserve, and the Wall Street banks affected by the 2008 financial crisis starting shortly after the failure of Bear Stearns and ending shortly after TARP was signed into law. However, I think it’s less of an objective recounting than it’s meant to be, and in many places the author prioritizes details at the expense of context.
For one thing, I know this book has a lot to cover but I don't think it should have relied on readers' existing knowledge about the crisis to understand the scope of the issues or why problems at one company imperiled the entire financial system. The book mentions in passing that CDOs intertwined the banks, but the author should have provided more background facts. So much of the narrative requires you to take as a given that these companies had to be saved, and it's difficult for the reader to assess whether they agree with any of the actions taken without those background facts. Nor is the reader given the context necessary to understand the decision making within each bank that led to and exacerbated the crisis. The author writes in the afterword that “[o]ne of the great lessons of the crisis was that CEOs who were perceived as all-knowing actually often had no idea what was taking place within their institutions only one floor below them, let alone across oceans on the other side of the world,” but the book doesn’t touch on this at all or allow the reader to arrive at this conclusion themselves. It’s entirely focused on how a handful of the highest-ranking people at a few of the biggest banks reacted as the crisis unfolded, sometimes myopically so.
Additionally, the book goes into such detail about the endless meetings and calls between bankers and the government that it obscures how the narrative is often biased. Reciting facts without explicitly stating your opinion doesn’t make your writing unbiased; as any lawyer who’s written a statement of facts in a brief knows, you can easily create a narrative with purely factual statements based on what you say vs. leave out. The same is true here: plenty of facts are left out, creating a narrative biased in favor of Wall Street (especially Lehman Brothers, for some reason), whether or not that was the author’s intent. A great example is the description of the Lehman Brothers bankruptcy hearing, which was something like eight hours long, yet the author says virtually nothing about the various legal arguments and focuses on the judge’s lamentations about the fall of a “great company” and how people cried at the end. If the intent was to inform the reader that the bankruptcy was complex, contentious, and quickly approved, the details about the lamentations and crying could have been left out. Spending so much time on how unfair Fuld (the head of Lehman) and others thought it was for the government to allow Lehman to fail makes it seem like Sorkin endorses this view, especially because the opposing viewpoint isn't shared in the same way. The book as a whole effectively makes the point that the government's decisions regarding Bear vs. Lehman vs. others made sense at the time given the information everyone had, but this is undermined by Sorkin's inexplicable treatment of Fuld as a sympathetic and tragic figure.
Similarly, there’s almost no mention of the impact of the book’s events on anyone other than executives – not even the Lehman and other employees who lost their jobs, even though that could easily have fallen within the book’s admittedly narrow scope.
Finally, this book is such a Great Man Theory of History book, it’s ridiculous. I don’t know how much to blame the author for that, since it’s a ubiquitous method of telling these types of stories, but to read this book you’d think that bank CEOs and Biglaw partners do everything by themselves and have no support staff. And the author loves telling you people’s rags-to-riches stories whenever possible, even when they’re of little relevance, but less “inspiring” origin stories are left out. It creates this false impression that everyone you read about in the book got there purely through hard work and being smarter than everyone else.
My nonfiction reviews always wind up being 95% critical no matter how much I enjoyed the book – I guess I just don’t have as much to say about the parts I enjoyed. I thought this book was illuminating, especially regarding the complexity of Treasury’s decision making and the inadequacy of simplified narratives of what happened and why the government acted differently regarding Bear vs. Lehman vs. AIG vs. others. But I think when reading this, it’s just as important to think about what’s been left out as what’s been included.
For one thing, I know this book has a lot to cover but I don't think it should have relied on readers' existing knowledge about the crisis to understand the scope of the issues or why problems at one company imperiled the entire financial system. The book mentions in passing that CDOs intertwined the banks, but the author should have provided more background facts. So much of the narrative requires you to take as a given that these companies had to be saved, and it's difficult for the reader to assess whether they agree with any of the actions taken without those background facts. Nor is the reader given the context necessary to understand the decision making within each bank that led to and exacerbated the crisis. The author writes in the afterword that “[o]ne of the great lessons of the crisis was that CEOs who were perceived as all-knowing actually often had no idea what was taking place within their institutions only one floor below them, let alone across oceans on the other side of the world,” but the book doesn’t touch on this at all or allow the reader to arrive at this conclusion themselves. It’s entirely focused on how a handful of the highest-ranking people at a few of the biggest banks reacted as the crisis unfolded, sometimes myopically so.
Additionally, the book goes into such detail about the endless meetings and calls between bankers and the government that it obscures how the narrative is often biased. Reciting facts without explicitly stating your opinion doesn’t make your writing unbiased; as any lawyer who’s written a statement of facts in a brief knows, you can easily create a narrative with purely factual statements based on what you say vs. leave out. The same is true here: plenty of facts are left out, creating a narrative biased in favor of Wall Street (especially Lehman Brothers, for some reason), whether or not that was the author’s intent. A great example is the description of the Lehman Brothers bankruptcy hearing, which was something like eight hours long, yet the author says virtually nothing about the various legal arguments and focuses on the judge’s lamentations about the fall of a “great company” and how people cried at the end. If the intent was to inform the reader that the bankruptcy was complex, contentious, and quickly approved, the details about the lamentations and crying could have been left out. Spending so much time on how unfair Fuld (the head of Lehman) and others thought it was for the government to allow Lehman to fail makes it seem like Sorkin endorses this view, especially because the opposing viewpoint isn't shared in the same way. The book as a whole effectively makes the point that the government's decisions regarding Bear vs. Lehman vs. others made sense at the time given the information everyone had, but this is undermined by Sorkin's inexplicable treatment of Fuld as a sympathetic and tragic figure.
Similarly, there’s almost no mention of the impact of the book’s events on anyone other than executives – not even the Lehman and other employees who lost their jobs, even though that could easily have fallen within the book’s admittedly narrow scope.
Finally, this book is such a Great Man Theory of History book, it’s ridiculous. I don’t know how much to blame the author for that, since it’s a ubiquitous method of telling these types of stories, but to read this book you’d think that bank CEOs and Biglaw partners do everything by themselves and have no support staff. And the author loves telling you people’s rags-to-riches stories whenever possible, even when they’re of little relevance, but less “inspiring” origin stories are left out. It creates this false impression that everyone you read about in the book got there purely through hard work and being smarter than everyone else.
My nonfiction reviews always wind up being 95% critical no matter how much I enjoyed the book – I guess I just don’t have as much to say about the parts I enjoyed. I thought this book was illuminating, especially regarding the complexity of Treasury’s decision making and the inadequacy of simplified narratives of what happened and why the government acted differently regarding Bear vs. Lehman vs. AIG vs. others. But I think when reading this, it’s just as important to think about what’s been left out as what’s been included.
January 26, 2023
First disclaimer: I only got a few chapters in, but far enough to confirm what the more astute reviewers on Goodreads had warned of. This book isn't an explanation of the causes of the financial crisis, nor an a probing interrogation of what decisions were made and why. Rather it is a "can't see the wood for the trees" hagiography of the incompetent politicians and regulators and greedy financiers who caused the so-called GFC, and then used public money to bail each other out. It's a story about how a bunch of courageous arsonists called the fire brigade to put out the hundreds of fires which had mysteriously started in the buildings next door to the The World Annual Arsonist Convention.
Second disclaimer: I used to be the CEO of an investment management group, and I successfully invested my my way through three major crises including the Asian financial crisis, Dot Com Crash and 2008. Part of the reason why, is that all three were entirely predictable, and in fact widely forecast by leading financial figures such as Warren Buffet.
I regard "To Big to Fail" as a dangerous book in the sense that Mein Kampf or the Protocols of the Elders of Zion are dangerous books. It seeks to propagate the provably untrue myth that the financial crisis was an unforeseeable global phenomenon, which could only be resolved by bailing out US investment banks. In fact is was predictable (and widely predicted) for years in advance - really starting from 1999, when the Glass-Steagall Act was repealed in the USA. Its direct effects were restricted to those countries which had irresponsibly deregulated their housing and banking sectors and avoided by those who hadn't (use Canada and Australia, for obvious comparison to the US and UK). And there is very little evidence to support the idea that letting AIG and Goldman Sachs go down would have caused anything like the domino effect or great depression implied here.
Second disclaimer: I used to be the CEO of an investment management group, and I successfully invested my my way through three major crises including the Asian financial crisis, Dot Com Crash and 2008. Part of the reason why, is that all three were entirely predictable, and in fact widely forecast by leading financial figures such as Warren Buffet.
I regard "To Big to Fail" as a dangerous book in the sense that Mein Kampf or the Protocols of the Elders of Zion are dangerous books. It seeks to propagate the provably untrue myth that the financial crisis was an unforeseeable global phenomenon, which could only be resolved by bailing out US investment banks. In fact is was predictable (and widely predicted) for years in advance - really starting from 1999, when the Glass-Steagall Act was repealed in the USA. Its direct effects were restricted to those countries which had irresponsibly deregulated their housing and banking sectors and avoided by those who hadn't (use Canada and Australia, for obvious comparison to the US and UK). And there is very little evidence to support the idea that letting AIG and Goldman Sachs go down would have caused anything like the domino effect or great depression implied here.
May 22, 2010
This book is not too big to read, or even too big to enjoy, provided that you are a reader who wants to be reading the book that is, rather than a long list of possible alternative books about the severest financial crisis since our Great Depression. This book is a reportorial non-fiction style book with a dash of fiction-like drama that is low on the "why" and heavy on the "who" and "who said and did what when." That part is done fairly successfully, although readers should be forewarned of two challenges. First, there is a very lengthy cast of characters and organizations to keep straight, even with both the essential comprehensive chart at the front of the book and also the helpful photo pages that appear mid-book. Secondly, there is no glossary to help the uninitiated with the finance style vocabulary peppered throughout the text. Nevertheless, the research for this account was clearly extensive, the details convey the emotional turmoil, and Sorkin's daunting effort will almost certainly become a treasure for future historians.
October 19, 2021
Having worked in the financial services industry for many years I lived through this time so there weren't too many surprises here. The scarier part of it all is that I fear that we neither learned from the crisis or changed our ways in any significant manner and with the constant call for deregulation from the very same people that created the problem in the first place, we are surely doomed to repeat history.
July 22, 2011
It is a long book and I did not make it all the way to the end. About 2/3 of the way through it, I realized I felt no sympathy for the Wall St bankers and how they blew themselves up and nearly took down the world economy too. It's hard to keep turning pages when your internal monologue is criticizing the poor poor rich men and their corporate jets and Manhattan apartments.
February 28, 2016
I picked this book up mistakenly thinking it was Paul Bunyan's memoir. It was not, but enjoyable anyhow.
July 16, 2024
Picked it up for an explanation, stayed for the drama
May 19, 2021
An in-depth recount of the crucial times before and during the collapse of Lehman Brothers (one of Wall Streets financial giants) and the near collapse of the other ‘too big to fail’ companies and banks. This came to be known as the 2008 global financial crisis.
The book was very immersive, it reads like a thriller. It also keeps your adrenaline pumping the entire time regardless of the fact that you know how this was gonna end.
The book was very immersive, it reads like a thriller. It also keeps your adrenaline pumping the entire time regardless of the fact that you know how this was gonna end.
March 6, 2023
Finally read this one from my shelves and it was just as riveting to read as when we all went through it back then. Definitely recommend it if you want to revisit that time period.
October 17, 2012
This was a very long and (at times, tedious) read, but in fact informative and worthwhile. The obvious question before reading it is whether or not it is biased, i.e. slanted either left or right...a logical question given how the crisis has been politicized. But frankly, I think Sorkin did his homework, and to my unspecialized ear, it sounds pretty complete and balanced. He also weaves a pretty good story to get you through all the minutiae.
And I have to say (much as I kind of hate to do so) that I emerged from it with a fuller understanding of what happened (and is still happening), and a bit more sympathetic toward many of the players and the pressures they were under and the decisions they had to make. I'm certainly more sympathetic towards virtually all the government players at Treasury and the Fed; less so to the bankers (save a few). It was certainly revealing to see how some truly fought to save their firms...but at the same time, distressing to see how some, at least, continued in denial right up to the end, while others continued their preoccupation for titles and positions and salaries and bonuses even as the were grasping at straws to save the world as they knew it...a world which was invariably crumbling because of their own greed and selfish shortsightedness.
There was a similar book written (and which I read) after the savings and load crisis of the 1980s that resulted from Reagan's deregulation of that industry, a crisis that also cost the government billions of dollars (though I believe less than the current crisis). I can't remember that book title now, and cannot find it. I wish I could. I remember it was excellent as well, and like this one, only too revealing. The difference is that, in that instance, much of what occurred was flat out criminal...whereas much of the current crisis seems, at least in a purely legalistic vs ethical sense, more justifiable as logical result of further deregulation.
What's missing in the book, though not integral to it, are a prologue explaining the history of deregulation, interest rate declines and the mortgage boom, and emergence of hedge funds and DDO's, and resulting actions on the part of investment firms that led to the crisis; and secondly, perhaps in the epilogue, an explanation of how the crisis, when it occurred, brought about the economic crises still going on in Europe..especially Greece, Spain, Ireland and Iceland.
I suggest reading the book, though it's a long read.
And I have to say (much as I kind of hate to do so) that I emerged from it with a fuller understanding of what happened (and is still happening), and a bit more sympathetic toward many of the players and the pressures they were under and the decisions they had to make. I'm certainly more sympathetic towards virtually all the government players at Treasury and the Fed; less so to the bankers (save a few). It was certainly revealing to see how some truly fought to save their firms...but at the same time, distressing to see how some, at least, continued in denial right up to the end, while others continued their preoccupation for titles and positions and salaries and bonuses even as the were grasping at straws to save the world as they knew it...a world which was invariably crumbling because of their own greed and selfish shortsightedness.
There was a similar book written (and which I read) after the savings and load crisis of the 1980s that resulted from Reagan's deregulation of that industry, a crisis that also cost the government billions of dollars (though I believe less than the current crisis). I can't remember that book title now, and cannot find it. I wish I could. I remember it was excellent as well, and like this one, only too revealing. The difference is that, in that instance, much of what occurred was flat out criminal...whereas much of the current crisis seems, at least in a purely legalistic vs ethical sense, more justifiable as logical result of further deregulation.
What's missing in the book, though not integral to it, are a prologue explaining the history of deregulation, interest rate declines and the mortgage boom, and emergence of hedge funds and DDO's, and resulting actions on the part of investment firms that led to the crisis; and secondly, perhaps in the epilogue, an explanation of how the crisis, when it occurred, brought about the economic crises still going on in Europe..especially Greece, Spain, Ireland and Iceland.
I suggest reading the book, though it's a long read.
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