511 of 528 people found the following review helpful
I thought it would take a couple of decades of perspective to tell the full story of the crisis. Meanwhile Michael Hirsh's Capital Offense (which covered the story from Washington), along with The Big Short by Michael Lewis (focusing on a few offbeat portfolio managers), Justin Fox's The Myth of the Rational Market (which went deep into intellectual history and gave testimony from many of the people who invented the theories), The Quants by Scott Patterson (working from the equations out) and Glenn Yago and Franklin Allen's Financing the Future (which traced the story from prehistory into the future and emphasized the positive side of financial innovation as much as the negative side) were the best available accounts. All had stylish writing, great stories and thorough research to cover important aspects of events.
Without taking anything away from any of those books, All the Devils are Here manages to cover every important financial aspect of the crisis. To be fair, it doesn't go into as much history or theory as Justin Fox, Michael Hirsh or Yago and Allen did, and it's not as great a story as Michael Lewis and Scott Patterson extracted. It covers the crisis and only the crisis and is too detailed to be as much fun as Lewis and Patterson.
You won't find gigantic surprises in this book, the usual suspects are examined: originate-to-sell, government-sponsored entities, political pressure to increase homeownership and provide jobs and perks for politicians and their friends, rating agencies, mathematical models divorced from commonsense and reality, CEO's remote from their businesses, and all sorts of people chasing profits and supressing doubts. What this account adds is nuance and balance. Different things mattered at different times, and in most cases there were at least some positive aspects. Things that everyone agrees were bad usually turn out to be bad in this account, but often in slightly different ways than is commonly assumed. Not all doubts were supressed, and a comforting number of people acted with honor and wisdom rather than short-term focus on profits or votes (not a decisive number, unfortunately, but comforting compared to popular conception).
If you read one book to understand the crisis, I recommend this one. Your understanding will be much deeper if you read all the ones above, and those might be better choices if you're interested in the crisis in some larger context, like the history of finance or political decision-making. But this is an amazing accomplishment, to distill this complete and even-handed a story while the fallout is still falling and few participants have had a chance to reflect on events and add perspective. No doubt there will be better histories in the future, but I'll bet the authors will all start by reading this one.
165 of 180 people found the following review helpful
on November 17, 2010
"All the Devils are Here" is a very ambitious book that attempts to weave together a wide range of narratives into a single story that explains the financial crisis. In general, I think the book does a very good job of taking on this challenge, but there is no way to get around the fact that it is a complex undertaking. The book takes a full 8 pages just to list the "cast of characters."
The story begins with the invention of mortgage-backed securities in the late 1970s and traces the founding and evolution of Fannie Mae and Freddy Mac. We learn about innovations in risk management and derivatives at JP Morgan and how they created the first credit default swaps and then later lured AIG into the game. Also covered are greed and mortgage fraud at Ameriquest and the failure of the ratings agencies to do anything close to an adequate job. There is also a lot of material on internal politics at Wall Street firms and especially how the risk management process at Merrill Lynch was undermined. Much of the story has been written about extensively elsewhere, for example how the Greenspan/Rubin/Summers trio pushed back against regulation of derivatives.
While "All the Devils are Here" offers one of the broadest takes on the financial crisis, I think it still fails to address one of the "devils" -- or perhaps even the elephant in the room. The book focuses entirely on the financial sector and misses the larger, structural shift that has occurred in the overall U.S. economy. That shift has been driven primarily by globalization and technology and the result has been stagnant incomes for the vast majority of people while a tiny few have seen their incomes explode. That left the middle class with little choice except to borrow in order to maintain their lifestyles. I think it is important to understand this broader trend toward income concentration because it shows no sign of abating and may well lead to another crisis. For more on this issue and the danger we may face in the future, I would also suggest reading this book: The Lights in the Tunnel: Automation, Accelerating Technology and the Economy of the Future
Read "All the Devils are Here" for a good overview of the major players in the crisis and how they interconnect. However, it's important to keep in mind that the real causes of the crisis cannot be divorced from the long term changes that are occurring in the economy as a whole.
51 of 53 people found the following review helpful
on November 19, 2010
Wall Street seems to float in an ether above Main Street, ubiquitous but at the same time untouchable. So translating the fog behind the 2008 financial crisis into language everyone can understand is a daunting task. In their new book, veteran journalists Bethany McLean and Joel Nocera slam dunk this difficult project.
The authors turn CDOs into something that makes sense, CEOs into the fallible humans they are, and even transform the government into a place readers can picture. The result is a book not only on the causes of the financial crisis, but commentary on corruption, systemic hubris, and human nature itself.
Granted, not all the players in the financial crisis are covered, making this book a supplement to existing (and worthy) tomes on Lehman Bros., Bear Stearns and others. What McLean and Nocera do cover, they line with such thorough detail that I learned reams of important new facts about the crisis.
Note that the book covers media whipping boys like Goldman Sachs and AIG in a more nuanced light. This helps business-minded readers understand how leadership and company culture contributed to the firms' post-crisis fates.
One of the book's most valuable contributions, besides its coverage of Fannie and Freddie, was Roland Arnall's Ameriquest. This corrupt company, heavy on cheating and cocaine, was one of the dirtiest players in the financial game. Yet the media and government-which ended up giving Arnall a post as US ambassador-continue to overlook it.
It's easy to say "systemic hubris," but much harder to describe what that looks like in real life. McLean and Nocera do this well. After finishing the book, I ended up with a big picture view of the financial crisis, of the humans whose greed built the straw house that burned in '08.
I followed the financial crisis while it was happening, and frankly always felt like pieces were missing. The books that I read after the financial crisis covered certain bits in detail, but I still had no bird's-eye view. Finally, "All the Devils Are Here" provided it (although, as mentioned, it didn't cover all the players in detail. That probably would have made the book 800 pages long). I highly encourage anyone who wants not only a chronology of the financial crisis, but a valuable look at human nature, to pick up this book.
(Review by Drea Knufken)
188 of 210 people found the following review helpful
on November 19, 2010
This is the story of how the financial meltdown came about. It begins at the beginning and continues until the end. It is a carefully constructed chronicle of the systemic greed and hubris, clueless shortsightedness and incompetence that brought the U.S. financial system to its knees. Although well written, and reads like a novel, it still is not an easy read and in the end it fails to place or assess blame. The authors make clear that the fundamental hidden assumption that drove the collapse (and that proved to be fatal in the end) was the notion that home prices would continue to rise indefinitely. Feeding this assumption were a host of enabling factors, most of which straddled the borders of both immorality and corrupt business practices. Every one of the participants listed in the book was in part complicit and culpable. Yet the authors "pulled their punches" when it came to assessing blame:
Loan standards were weakened until they were non-existent. Lenders, as well as the recipients of loans, were both drunk on the home-lending madness, which driven by Congress and Freddie Mac and Fanny Mae, became a national orgy. The ratings of the rating agencies were worthless primarily because they not only lagged the housing market but at the same time depended on and mimicked the very company and markets they were trying to rate? Rules regarding capital requirements became worthless, and thus increasingly were skirted - as was generally true with other aspects of the process. This continued throughout the evolution of the process.
The train of "packaged loans (virtually worthless paper)" were leveraged to the sky, without even a semblance of an institutional safety net. Insurance on the loan packages, and the CDOs, too were inherently worthless. Bankers lied to themselves and to their buyers, just as the buyers lied to themselves - all in an orgy of deception and self-deception that constituted a cycle that could not be either turned around or turned off.
Homeowners were greedy & irresponsible borrowers: The mortgages they owned, were not bought, they were sold to them; and what the owners got in turn was not a home but a piece of paper that became worthless as soon as the ink dried. Regulations were in place sufficient to manage the process, but were not enforced. Nor as the book makes clear, can we ever guarantee that any regulations ever will be enforced. Or for that matter, can we guarantee that any rating agency can exist as a truly independent and thus valid rating agency.
In the end, the CDOs amounted to a clever version of a Ponzi scheme - primarily because they did not bring in capital, only provided prices for more and more markets, so that banks could hedge and leverage their exposure, brokers could get paid their lavish bonuses -- allowing everyone to ignore the inevitable and live with their heads in the sand for another day. They did this until the collapse finally brought the whole scheme down.
The authors cover each area with the technical skills of the consummate experts they are; and with a political sensitivity that finessed the issue of blame and culpability. This was the only aspect that actually annoyed me: Even though they named all of the players, they left it up to the reader to draw conclusions about the guilt or innocence of the players. Thus, they were much too careful in avoiding engaging in finger pointing. I ended the book with a very uneasy feeling that all this work was in vain: At some point blame must be assessed if systemic problems of this nature are to be fixed once and for all, and if similar ones are too be avoided in the future. Three stars.
48 of 54 people found the following review helpful
on November 22, 2010
1. I'm disappointed that people are using this as a pulpit to complain against ebook pricing. The authors put a lot of time and effort into creating this text only to have it rated low by users for a completely different issue. It's like picketing a car dealership over the price of bananas.
- If you want someone to blame, go to the publisher, they are the ones that set the prices.
- If you want someone else to blame, go to Apple, they are the ones that renegotiated ebook pricing with publishers after Amazon had been driving it to almost and across the board pricing
- Amazon responded by not selling books for a day (i believe it was one publisher) to make a point.
While I appreciate the frustration of the Kindle owners (I personally own a Nook and paid as much) I also value the integrity of a review system and that if you dilute it then it's power is lost. Keep the reviews coming, just for the right things.
2. I've seen a couple of the reviews of this book and i would say they provide a fairly good level of review, so I will comment on them. In general I think this was a well written book. It keeps things understandable, things that are extraordinarily complex, but in a way that anyone can basically understand. They provide a good definition of the characters and put it in a timeline that keeps it interesting and climactic. Some reviewers commented that they didn't find blame, or they blamed the wrong people. I saw it differently in that they presented the significant characters and what they perceived they did along with commentary from others. I don't see that they blamed any one figure, but to not at least see some players as guilty is naive. But I think that you could spend a lot of words on the blame game and not really accomplish much more. There were a lot of folks at fault, all up and down the chain. And i think that's the point, there are lots of folks to blame for many different aspects. To me it's more a culmination of all the mistakes, intentional and unintentional, but that they were almost additive in the end. It's a remarkable chain of events and remarkably unfortunate.
31 of 34 people found the following review helpful
on November 20, 2010
"Devils" is a compelling read because it shows the role that human nature played in the debacle. Whether it's the hubris of CEOs who refused to listen to dissenting voices, the envy and competitiveness of those who saw the huge profits their competitors were making, the greed of those all the way up the chain of command who chose to remain ignorant about the shoddy loans underlying their business, or the naivete of borrowers who thought they could get something for nothing, nobody comes out looking good. It's not an easy read - understanding some of the financial transactions can take a little work for those who are not experts, but it's well worth the effort.
Some reviewers complain that the book does not place blame where they feel it belongs. I found the authors' reluctance to place blame a strength rather than a weakness. Books that harp on who's to blame get read mostly by people who already agree with the authors' conclusions, and that doesn't advance the debate. In contrast, this book describes who did what and lets readers draw their own conclusions about culpability. While the human stories are what keep you turning the pages, along the way the general reader will learn quite a bit about the mechanics of how the industry worked and what went wrong. However if it's only the technical aspects that interest you, there are other books that go into more depth and have clearer explanations.
The financial crisis was complex, and this book avoids the trap of over-simplification. Rather than telling you what to think, it leaves you with a lot to think about.
15 of 15 people found the following review helpful
on January 11, 2011
This is not the sexiest book on the financial meltdown, but it probably is the most detailed, sober analysis of the lead-up to the crisis to come out so far. For a play-by-play of CEOs running around on Lehman weekend and dodging each other's calls (and not a single insight into why it all happened), go to Sorkin's Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the FinancialSystem--and Themselves. For indigestible (and largely irrelevant) inside baseball about Bear Stearns, see William Cohan's House of Cards: A Tale of Hubris and Wretched Excess on Wall Street. For some of the outlandish characters in Hedge Fund Land who saw it all coming and made a killing, go to Michael Lewis's The Big Short: Inside the Doomsday Machine (still the best read on the crisis). For a detailed and informed road map to how we got here, read this book. McLean and Nocera carefully reverse engineer the current mess we are in and show us how the gigantic landfill of toxic assets was excavated over the course of three decades and progressively filled with some of the worst investments in the history of the modern world.
Each chapter provides a new domino. The first is mortgage securitization, the second is the appearance of non-bank mortgage originators and the subprime mortgage industry, the third is J.P. Morgan's invention of the collateralized debt obligation, the fourth was the anti-regulatory bias of the Greenspan Fed, the fourth is the Clinton administration's quashing of the CFTC's attempt to regulate derivatives, and so on and so on. Each step on the road to the Hell of the New Normal is chronicled with an objectivity that only toward the very end veers off toward condemnation (and there is plenty to go around).
Some of the material is familiar, some of it isn't. Although based on the mountain of work by many other journalists, it manages to unearth a lot of new information. Mostly, however, it provides a cathartic synthesis of the entire mess. If you sat through the financial crisis from 2007 to the present like the protagonist in Clockwork Orange --tied to a chair and forced to open your eyelids to see all of it-- then this is the book for you. Some of it will be familiar from early coverage of the initial glimmers of rampant excess in the subprime mortgage industry. Other facts are less familiar. I did not know, for example, that the bulk of subprime lending was actually refinancing. What that means is that many people on boring and safe thirty-year mortgages were enticed (or even scammed) into shifting to the toxic ARMs and other WMDs spewing out of the financial meth labs. Now that is scandalous.
Perhaps the one thing that surprised me most was the authors' impassioned plea that financial innovation actually does not serve any useful purpose. This runs counter to Robert Shiller's The Subprime Solution: How Today's Global Financial Crisis Happened, and What to Do about It. It is not up to the layman to decide, but I must say there are powerful arguments in here for curtailing the more audacious creations of the Wall Street Edisons.
Not the last word on the subject and maybe not definitive, but a great addition to the 2008 disaster genre. Talking and reading about it helps.
22 of 24 people found the following review helpful
There are all kinds of business books out there, hundreds, even thousands sold every year. Very few of them are written so well, that you are compelled to finish it when you start. "All the Devils Are Here" is a tale that needs to be told, and is told in such a way that you will find yourself going without eating to finish it.
I knew Bethany McLean's work previously from reading "The Smartest Guy in the Room". It's the same deal, great story, written in a compelling manner. In this book there are 22 chapters of narrative written in 358 pages. Here are just a handful of the colorful characters you will meet and learn considerably about.
* Stan O'Neal - CEO of Merrill Lynch
He's aloof, suspicious, completely envious of competitor Goldman Sachs, and personally is very insecure. He could not stand having people of superior intellect around him, and in a corporation that is precisely what you need.
* Franklin Raines - Head of Fannie Mae
You talk about screwing up, the American taxpayer may have to lend Fannie Mae a hundred billion dollars before it's over, and somehow Raines still got a severance package.
* Brian Clarkson - CEO of Moody's the rating service
Only in America could Clarkson have come up with the concept that you could take third tier bonds, and if you put enough of them together, they could be triple AAA rated. The concept would plow the country deep into the financial crisis.
* Hank Greenberg- The modern founder of AIG
In the end, Greenberg developed a company with so many layers of intertwining intrigue, that only he knew how all the pieces fit together. It was a house of cards.
* Angelo Mozilo - CEO of Countrywide, the loan people
He wanted homeownership for everyone, and in the process of actualizing the myth, helped to bring on the financial crisis which would also destroy his career, and independence of his company.
There are many more players and their stories. The above are just the key players, but you will also get to know Alan Greenspan, Jimmy Cayne (Bear Stearns), Alan Greenspan, Lloyd Blankfein (Goldman Sachs), and more. If you think you understand Wall Street, think again. Reading the newspapers won't help you. You need to hear it from a master storyteller, and that's what you get with McLean and Nocera. In page after page, they put it all together for you. They take the disparate parts, and weave a mosaic that allows you to finally understand how did we allow ourselves into this mess? Who did it? Could it have been avoided? Finally, are we out of the hole yet, or are we digging further in?
You will learn about how Stan O'Neal schemed, and plotted his way to the top of Merrill Lynch, forcing previous CEO David Komansky out of his job earlier than expected. O'Neal proceeds to gut the firm of its enormous talent base, and brings in a bunch of yes men, to assuage his ego. He fires the head of risk management, only to have to rehire him later on. O'Neal practically collapses when he's told that the firm owns tens of billions of dollars of unsalable bonds. O'Neal was ultimately fired. I had the pleasure of seeing him on a Jet Blue flight to Florida recently. Gone is the Gulfstream jet he used for a play toy. I must admit to taking pleasure by yelling, "Hey O'Neal, how do you like Jet Blue." I'm a taxpayer too.
You'll learn how Goldman Sachs went from putting the client first to a firm now better known for its proprietary trading desk, and private equity group. O'Neal may have envied Goldman, but Goldman knew how to manage risk. They would elevate their risk management group to the same level as other groups in the firm; giving them independence to sniff around and tell the CEO what they really thought was happening. Only Goldman managed to survive the financial crisis unscathed, while everyone else was writing off tens of billions of dollars.
The story of Moody's was especially interesting. Warren Buffett bought 15% of the company because of its impregnable market position, coupled with steady, reliable, and huge cash flow. In one year, Moody's went from 35% of the mortgage backed securities market to a 59% market share. How did they do it? They blew up their standards, shifted their analysts around in order to make them ask fewer questions, and started charging millions every time an investment bank wanted to do a 100 million dollar collateralized bond obligation.
Moody's believed and promised the unthinkable. You could take poor bonds, but by putting them together and bundling them, you could make them triple AAA rated. As a rule, institutional buyers do not look beyond the triple AAA rating. They simply rely on the integrity of the rating agency. Moody's thought the laws of economics had been repealed. What is amazing is that to this day, Moody's has never been punished for their actions.
If you want exciting, if you want compelling, then you must get your hands on this book. It will make you angry, even furious at how the regulators looked the other way. You will never trust Wall Street again and why should you? It becomes apparent that many people in financial services are paid four, five, six times what people make for the same function in other professions, and industries, and yet they required an $800 billion bailout from mom and pop America.
There have been upwards of 50 books written about the financial crisis. As of this date, "All The Devils Are here", is the best of them. It is the most interesting, and it is laid out in easy to read language with no axes to grind, no hidden agendas. It will give you clarity, as to the interplay between government, Wall Street, and the banks. I give this book five stars, and thank you for reading this review.
Richard C. Stoyeck
17 of 18 people found the following review helpful
on December 10, 2010
If you want an even more cynical, more lively, and shorter take on the financial crisis, read Matt Taibbi's "Griftopia:...". Paired with this book, both make for a comprehensive look at the Great Financial Crisis of 2008.
About this book's first half:
The first half (or so) of "All The Devils Are Here" is very interesting. The authors do a good job of explaining the major aspects of the 30-year history leading up to the financial meltdown of 2008, including: government de-regulation, the original purpose and evolution of credit default swaps, insurance giant AIG's financial products division, and finally the least-known aspect of the financial crisis, the sleazy sub-prime industry, . The authors also explain the history and ever-evolving function of the private, government, and quazi-government entities that were involved, including: the U.S. Federal Reserve and U.S. Treasury, Fannie Mae/Freddie Mac, good-ole Goldman Sachs and similar investment banks on Wall Street, the major sub-prime lenders, and finally insurance giant AIG.
But what I found most interesting about the first half of the book is that the authors explain-and put great emphasis on-the changes in culture from one generation of businessmen and women to the next: from the old school "gray hairs" of the early years, to the "quants" of the '80's and '90's and finally to the outright delusional, money-grubbing thievery of the final decade's characters (or Devils). A de-evolution of the system: starting from the good idea of building real prosperity, i.e. home-ownership and investment capitol, to the really bad idea of generating profits (for a handful of people on Wall Street), i.e. synthetic securities.
All of the usual suspects (or Devils) are here: Paulson, Bernake, Cassano (who is considered patient zero of the whole crisis), the "Committee to Save the World", Clinton, Reagan, BushI & BushII, the disappointing Obama, the ineffective Congress, the heads of all the investment banks past and present, the heads of Fannie and Freddie past and present, and the heads of all of the sub-prime lending companies past and present. Enough people to start a small town. One I would not want to live in! Most of the people are good (from their own standpoint) or at least well-intentioned like Hank Paulson, and some, like Roland Arnall-the head of Ameriquest- for example, are down right shady.
It takes a lot of people, making a lot of very bad decisions for a very long time, to blow up the world economy-ye be warned.
The second half of the book is just a rehash of the events leading up the the final months (and days) of the financial meltdown. But it's explained in an "insider" kind of way as told by the people who were actually there. You get a feeling of deja vu when reading the book because you've heard these stories before on the news; but this time you're in the middle of the action and not just watching from the sidelines.
One last thought: I'm guessing that there several people that were interviewed for this book, but, for obvious reasons, wanted their identities kept private. All throughout the book, people are quoted as "someone who was in the meeting" or from "a trader that heard the conversation" or from "a popular hedge fund manager". I don't blame them one bit for this. Just look at what is happening to Wikileaks and its people, not to mention all of the death threats they would probably get.
18 of 21 people found the following review helpful
on November 20, 2010
I am only about 40% through this book but I had to stop and give it 5 stars! This is an excellent and balanced account of the events, laws and business practices that led up to the crisis. This is not a book that over-simplifies the crisis with terms like "Wall Street Greed". Instead, it sheds light on all the variety of players that it took to create this mess: Fannie/Freddy, The Sub-prime companies (many you probably never seen mentioned in press), policies and laws that go back to the Clinton era, failures of regulators and the justice department, the Fed, Banks, Wall St., the Rating agencies and of course, the general publics own stupidity.
If you are willing to accept the fact the the answers to the cause of the crisis are not simple and you "can handle the truth" then you must read this book.