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A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers Paperback


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A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers + Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the FinancialSystem--and Themselves + The Big Short: Inside the Doomsday Machine
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Product Details

  • Paperback: 368 pages
  • Publisher: Crown Business; Reprint edition (October 12, 2010)
  • Language: English
  • ISBN-10: 0307588343
  • ISBN-13: 978-0307588340
  • Product Dimensions: 2 x 3.1 x 0.4 inches
  • Shipping Weight: 9.6 ounces (View shipping rates and policies)
  • Average Customer Review: 3.9 out of 5 stars  See all reviews (288 customer reviews)
  • Amazon Best Sellers Rank: #310,893 in Books (See Top 100 in Books)

Editorial Reviews

Review

“...gives the readers a visceral sense of what it was like to work at Lehman Brothers and the fateful decisions and events that led to the company’s death spiral...”
—Michiko Kakutani, The New York Times

“Highly readable…A Colossal Failure of Common Sense largely rings true. It expresses the anger that many former Lehman employees still feel toward Mr. Fuld. And it convincingly characterizes the investment bank as a house divided against itself, between the bears who had foreseen bubbles and the bulls who wrongly believed that this time was different.”
—The Economist

“... describes a CEO ­acting as if his firm was too big to fail.”
—Wall Street Journal

“...poignantly told...from an insider [who] witnessed, often in amazement and disgust, the corporate dysfunction and hubristic leadership that led to [Lehman’s] demise.”
—BusinessWeek

“...engaging and even funny.”
—Fortune



From the Hardcover edition.

About the Author

LAWRENCE G. McDONALD is a managing director of Pangea Capital Management LP. He was, until 2008, vice president of distressed debt and convertible securities trading at Lehman Brothers. He ran an extremely successful joint venture between the firm’s fixed income and equity divisions and was one of Lehman’s most consistently profitable traders. McDonald is also cofounder of Convertbond.com, named by Forbes magazine as “Best of the Web” from 2000 to 2003, specifically citing it as the Web’s premier source for convertible securities information, valuation, and news.
 
PATRICK ROBINSON wrote Lone Survivor with the U.S. Navy SEAL Marcus Luttrell.


From the Hardcover edition.

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Customer Reviews

First of all, the book is very well written.
J. Savani
The author spent way too much time talking about his career and brilliant calls, and way too little time on what was happening in the executive suite.
Carson Cole
I have really enjoyed his book and I think all the people must read it to know some things about the crisis.
Pedro Ramon Berjillos Salm

Most Helpful Customer Reviews

358 of 431 people found the following review helpful By cynic on August 14, 2009
Format: Hardcover
Two kinds of people are likely to be attracted to this book: the common man in the street who wants to know how a company like Lehman blew up so spectacularly and the financial markets insider who wants to know the inside scoop.

If you are the former, this book is likely to please. It has all the elements of a pot boiler - the breathless accounts of secret meetings, mutiny in the boardroom and the heroic efforts of a few key guys trying valiantly to save the sinking ship. It has the relentless enemy and the arch villain. The only thing missing is the scantily clad woman draped over the hero's arm.

The other side of the barbell is the financial services insider who knows all the acronyms inside and out - CDO, CLO, RMBS, CMBS, SIV who is nevertheless looking for a straight account of what went wrong - like the classic 'smartest guys in the room' on the Enron disaster.

If you are on that side of the barbell, steer clear of this book. It offers no insight into anything, except perhaps the massive ego of a low level trader. By all accounts, Larry McDonald should never have been allowed to place the kind of bets he claims to have made. He was obviously a junior trader on a bond desk that used shareholder money to short everything in sight taking massive short CDS positions on all sorts of names, good and bad. The irony seems entirely lost to him, but his desk was part of the CDS problem - buying protection with no underlying holdings.

Like any gambler, he worships the analyst (Jane Castle) who gave him the hot tip - (Buy Delta, young man!) but is too dumb to acknowledge that Delta could easily have woundup another Eastern, or more to the point, another TWA. The 'hostile' bid from US Airways that made his profit, nearly killed US Airways...
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39 of 46 people found the following review helpful By Carson Cole on October 5, 2009
Format: Hardcover Verified Purchase
This book is not a detailed look at why Lehman fell. It is one persons view--a lopsided view from the trading desk. The author spent way too much time talking about his career and brilliant calls, and way too little time on what was happening in the executive suite.
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114 of 147 people found the following review helpful By Todd Bartholomew TOP 500 REVIEWERVINE VOICE on July 21, 2009
Format: Hardcover
The collapse of Lehman Brothers is seen as the pivotal event that led to the economic collapse of 2008 and much press has been devoted to the exact chronology of how Lehman came to fail. But it takes inside knowledge to really get into the corporate psychology, culture and the psyche of the employees and Larry McDonald is that person. A farmer Vice President at Lehman, McDonald has the knowledge and insight to know what led Lehman to take the actions that ultimately led to its demise and McDonald repeats quite convincingly here his central premise as to what led to the collapse; that it wasn't a large number employees, but only eight, including CEO Richard Fuld. It was the investment strategy of this small coterie of employees that overextended Lehman's holdings of credit default swaps, collateralized debt obligations and derivatives that ultimately led to Lehman's desperate need to de-leverage and quickly seek an infusion of capital. McDonald paints a portrait of detached and distant senior executives who created an almost separate lair at Lehman's headquarters that only served to increase their detachment. In turn these leaders inculcated a culture of relentless demand for results led employees to take greater risks and in turn fostered a culture of greed.

McDonald's tale of `mission creep' when it comes to declining ethics is a familiar tale whether it is WorldCom, Enron or Lehman. But at times his premise seems a bit conflicted: if the truly destructive forces at Lehman were limited to these eight employees alone then why focus on the broader culture of declining ethics? Weren't those declining ethics equally responsible for Lehman's collapse? Can someone so close to the situation really be objective in analysis and conclusions?
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43 of 55 people found the following review helpful By Don Draper on August 12, 2009
Format: Hardcover
The fall of Lehman, including the hubris and mismanagement of Dick Fuld and Joe Gregory, is an important story to be told. However, this book is a colossally painful read. I would wait until future books by journalists come out.

This book is simply a vehicle for McDonald's own ego and hubris, which is ironic given the subject matter. He claims that he is an insider, but he was one of thousands of vice presidents. And yet he deceptively tries to paint the picture that he, Michael Gelband, Alex Kirk, and Larry McCarthy were all at the same table. This, along with lines like "I was the only one who realized..." go to his overall credibility and makes me just roll my eyes.

Everything is black and white to McDonald, but there is much more nuance to this story and that's what I want to read. And the melodrama throughout the book is beyond annoying -- starting with the line "It was probably the worst triple since St. Peter denied Christ." Seriously? And it's like that all the way through the book.

Long story short, the only reason why this book will make any money is because it's the first book out. But it's worth the wait to get the story from an author whose goal is not simply self-promotion and my take-away from this book is that McDonald wrote it more to stroke his ego than anything else.

There will be plenty of books that take the necessary and critical look at Fuld and Gregory's actions, so save your time and money and skip this one.
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