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Confidence Game: How Hedge Fund Manager Bill Ackman Called Wall Street's Bluff Paperback – March 29, 2011
"The Black Presidency"
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— Todd Sullivan, valueplays.net, April 2010
" ... Ackman’s pursuit of MBIA spanned the two major crises of capitalism of the last decade, from the earlier era of corporate fraud prosecutions epitomized by Enron and its off-balance-sheet special purpose vehicles (SPVs), to the late credit debacle stemming from the collapse of the CDO house of cards."
—The Hedge Fund Law Report, May 2010
From the Inside Flap
Confidence Game is a real-world "Emperor's New Clothes," a tale of widespread delusion and one dissenting voice in the era leading up to the worst financial disaster since the Great Depression. Wall Street appeared to have found the secret for turning everything from risky mortgages to credit card bills into super-safe, triple-A-rated securities. Behind the facade of safety, the financial system had become dangerously fragile. Few had anything to gain from pointing out the risk.
Bill Ackman did. In 2002, the hedge fund manager issued a critical research report on MBIA Inc., the owner of a triple-A-rated bond insurer that played a central role in the financial alchemy on Wall Street. "This company will spiral downward," Ackman warned, and he placed a bet against MBIA that would earn his investors billions of dollars if it did.
The backlash was swift. Ackman was branded a fraud in the press and investigated by Eliot Spitzer and the SEC. Despite the scrutiny, he spent years telling anyone who would listen why MBIA was a catastrophe waiting to happen. With the onset of the credit crisis, the problems exposed turned out to be bigger than MBIA. An unquestioning acceptance of credit ratings, a blind eye to leverage, a dangerous reliance on financial models, and the abandonment of common sense had become part of a deeply flawed financial system. The collapse humbled nearly every large financial institution and plunged the country into recession.
Ackman's story captures an era of delusional confidence, when debt exploded yet risk appeared to vanish. Told by award-winning bond market reporter Christine Richard, Confidence Game is a behind-the-scenes look at how warnings went unheeded as Wall Street careened toward disaster.--This text refers to the Hardcover edition.
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Joseph "Jay" Brown, then MBIA's Chairman and CEO, met with Ackman in 2002 about a negative report Ackman was about to release. Ackman recalls this power-play (P. 6):
"You're a young guy, early in your career. You should think long and hard before issuing the report. We are the largest guarantor of New York state and New York City bonds. In fact, we're the largest guarantor of municipal debt in the country. Let's put it this way: We have friends in high places."
Ackman published the report on his fund's web site: "Is MBIA Triple-A?"
Here's some ironic background you won't find in Confidence Game. In 2003, Jack Caouette, then Vice Chairman of MBIA (he left in early 2005), wrote a blurb, still visible on Amazon, for my book on the dangers of credit derivatives and synthetic CDOs, Collateralized Debt Obligations and Structured Finance : New Developments in Cash and Synthetic Securitization. He began: "Caveat Emptor! Never in the history of finance has this warning been more appropriate."
Ackman's concerns were reasonable. Structured finance is easily gamed, and fraud was common. Moreover, Ackman was correct about several other accounting issues unrelated to synthetic CDOs.Read more ›
The lack of attention is a shame, because it's an amazing, amazing book.
Hedge fund manager William Ackman gave author Christine Richard impressive access. She writes, "Ackman gave me a CD-ROM containing every e-mail he had written or received that mentioned MBIA as well as years of appointment calendars and access to an office filled with more than 40 boxes of documents he'd collected in researching MBIA. He encouraged colleagues, advisers, and friends to talk with me and spent hours answering my questions."
The result is a fast-paced, behind-the-scenes look at how a "short" investor uses the press, stock analysts, and the government to beat down the price of a stock he has bet against.
Mr. Ackman's campaign that is at the heart of this book is his war against Municipal Bond Insurance Association, or MBIA.
Here the key journalist seems not to have been anyone at the New York Times, or even Ms. Richard, who worked for Dow Jones and Bloomberg. No, it was "Marty Peretz, the editor-in-chief of the New Republic magazine, who had been Ackman's thesis adviser when he was an undergraduate at Harvard."
Mr. Peretz, reports Ms. Richard became the first investor in Mr. Ackman's hedge fund after Mr. Ackman "drove from Boston to Peretz's summer house on Cape Cod to pitch him the idea." (Mr. Peretz tells me the investment was $500,000, made at the time and not subsequently increased.)
By Ms. Richard's account, Mr. Peretz wasn't exactly what you'd call a passive investor. After the SEC didn't really follow up on a meeting in which Mr. Ackman aired his allegations about MBIA to SEC staff, Mr.Read more ›
Most Recent Customer Reviews
Amazing amount of detailed information about the biggest lynchpin in the financial crisis no person outside of financial service ever heard of. Read morePublished 10 days ago by Andrew Nelson
Somehow this book manages to make what sounds like the most boring possible subject - municipal bond insurance - engaging. Read morePublished 1 month ago by Eric Trusiewicz
If the causes and events of the 2008 financial crisis interests you, this is a must-read. Who would believe the topic of bond insurance could be gripping? It is.Published 1 month ago by Hans Morefield
I found Confidence Game: How Hedge Fund Manager Bill Ackman Called Wall Street’s Bluff by Christine Richard to be a most riveting story about Bill Ackman’s short trade on a bond... Read morePublished 2 months ago by 2441047
This book was a great read and I highly recommend it, Bill Ackman is this generations Warren Buffet and anyone betting against Bill Ackman should read this book first, very... Read morePublished 4 months ago by Eric Moore
It's a book about Bill Ackman and his short investment thesis on MBIA, bond insurer. This book should be read along with Mike Lewis' The Big Short: Inside the Doomsday Machine to... Read morePublished 5 months ago by John Stedge
I bought this book along with David Einhorn's ( Fooling Some of the People All of the Time, A Long Short (and Now Complete) Story, Updated with New Epilogue ) which is very similar... Read morePublished 6 months ago by Howard
The author's ability to explain the technical complex terms in vivid layman language is surprising. Although there is pretty clear position taken ithrough the lines, the authors... Read morePublished 9 months ago by Catdog