Customer Reviews

FIASCO: Blood in the Water on Wall Street

5 star:		(17)
4 star:		(16)
3 star:		(5)
2 star:		(5)
1 star:		(4)

 

 

A very good introduction to derivatives (and even some general finance for novices) and one of the better looks at how degenerate Wall Street culture can be. Though comparisons are frequently made to Liar's Poker, I found FIASCO to be a more useful read, even though it's not quite as funny as Liar's Poker was at its best. The usual tales of arrested development among Wall Street's community are here, but there's a much more gripping and sobering tale of how rapacious greed knows no bounds, and how a large number of actors, including large multinationals and even governments, ultimately pay the price.

Partnoy doesn't tell his story as smoothly as he could, and his narrative sometimes feels larded with anecdotes that don't add much color or relief. He also struggles at times to weigh his role in the big picture. Overall though, he describes his experiences and general Wall Street culture with enough insight that you can feel his disgust, and applaud when he eventually steps away from it all.

A great business book, flaws and all, and a perfect antidote to all the puffery surrounding coverage of financial markets and Wall Street these days. Now when will we see a book of investment banker/derivatives trader jokes, to add to all the great lawyer joke books?

Partnoy, now a law professor at the University of San Diego, was a derivatives salesman for First Boston and then Morgan Stanley, 1993-95. In this "tell all," revenge-tinged book, he makes the crew at Morgan Stanley look like nerdy brutes without conscience, intent only on ripping off people's faces. (Their expression.) The acronym in the title stands for "Fixed Income Annual Sporting Clays Outing," during which the traders at Morgan Stanley "honed their killer instincts." Partnoy quotes his boss at Morgan Stanley as saying after some derivative losses, "There's blood in the water. Let's go kill someone," meaning, sell them risky derivatives while we cut ourselves a huge commission.

Strangely readable book. The greed and money lust and the pathetic macho posturing of the derivatives sales people fascinated. The stupidity of the bankers, insurance fund managers, etc. who bought the risky and complicated derivatives concocted by the Morgan Stanley people, amazed. Partnoy himself comes across as someone who went along with the program until it got just a little too ugly and then got out. I suspect there is another side to this story.

I am a trader working in derivatives in one of those financial firms. I thought this book was on a more detailed(complex) level than Liar's Poker. While I highly related to Liar's Poker during the earlier part(trainee/junior analyst) of my career (many similar events occured for me as well) I can now relate even more with this book (after working for four years). I think many people can have trouble with the complexities as FIASCO tries to explain in depth the structures of complex derivatives. I though that these explanations which were fascinating in showing the creativity of certain banks. This was an element missing in Liar's Poker. Also I don't think that Partnoy's main focus was that banks were just ripping off "innocent victims". There are many people in finance who are restricted from leverage (increasing risk) and willing to pay for it. If Wall Street has the monopoly on giving leverage to those who don't have legal access, they will certainly get large profits for creating those derivatives. This is a basic law of economics. I believe that the main point that Partnoy was making was the extent to which large financial institutions were disguising the risk they were taking and how Wall Street gave them the instruments to do so. It is more of a "scheme" then anything else. Anyway, I thought this book is definitely something for all traders to read (especially those in FX and fixed income).

F.I.A.S.C.O. offers a look at the ruthless game of derivatives trading on Wall Street, and the devastation of losses upwards of billions suffered by the fools off Wall Street. In this fast paced book, Frank Partnoy chronicles his journey as a derivatives salesman at Morgan Stanley. You will learn how institutions ranging from banks to governments got "blown up" or had their "faces ripped off" by Wall Street's army of fierce derivative salemen. You will cringe at how many organizations that touch your life may be involved in trading these complex, highly leveraged, instruments when they may not even know it or be legally allowed to invest in them.

Portnoy tells his story in a fluid style, leaving the reader wanting more, page after page. This book exposes the greed and ignorance of the market's fools, or customers, and the eagerness of the Wall Street investment firms to offer ever more enticingly packaged derivative instruments to help them achieve their ruin. Everyone who has money in the markets should read a few books like this to get a more realistic idea of what these venerable Wall Street institutions really think of their customers.

Looking back from a 2009 perspective, this horrifying book, depicts the inner workings and the amoral habits of the Wall Street criminals at work. It is hard to ignore like a bloody car wreck. These rotten people knowingly robbed their clients, then all of us and ultimately dumped the world economy down the toilet, Once these types of scum were said to be freaks on Wall Street. Now we know better.

Now that there is a proven market for recent financial history/humor books, after the stunning success of Liars Poker, Predator's Ball and Den of Theives, this book FIASCO is another one of these books that tries to emulate the financial stories from the 1980's.

To my knowledge it is the first book to take on the derivatves trading industry, which is extremely volatile and can be the most risky sector of the financial markets, if you choose to speculate in it. More importantly, there will eventually be a derivatives disaster outside of the Long-term Capital one that occurred a couple of years ago.

This book, as I read it, is highly sensationalist. I have worked in the financial service industry with institutions and chose to leave the industry about a year ago. Here are my thoughts on this book as it relates to the derivatives markets.

1. Mr. Partnoy gives a high level description of some of the transactions that he was involved in

2. He seems to be indicting the market in derivatives, which I disagree on since he is dealing with institutions, which already should have a fiduciary responsibility to their clients. If they are dumb and allow an investment bank to "rips their face off" as Partnoy claims then they shouldn't be 1) in those financial products or (2) doing business with them. It is their choice!

3. From the reading it seemed as though Partnoy doesn't understand his role in the machine known as Wall Street. He is a salesmen, pure and simple. He gets paid to ring the register, nothing more. Other people construct the deals and he is the marketer to clients. If he makes clients money they should come back more and more. Often times, there are MANY other factors that cause business to vary from firm to firm. LOTS of different agendas/goals in mind.

4. Some of his anecdotes, particularly those in which he discusses the atmosphere in an investment bank around bonus time (pg.40 - 42, 202 - 205), are pretty amusing and dead on accurate.

5. The author's descriptions of some of his deals are clearly told from a junior banker's perspective, but they do a good job of putting forth what was being done, how it was being done, what everyone's perceived incentives for the transaction were, the work required to get the deal done, what kind of money, and importantly what kind of fees were involved.

In conclusion, like all books written by former investment bankers the book contains liberally sprinkled anecdotes regarding job interviews from hell, the ridiculous daily escapades that can occur on a trading floor, strip clubs, the lack of personal lives, gambling trips and other stories which could easily have been pulled from the pages of Mr. Lewis's book or "Monkey Business" by Rolfe and Troob. Folks, not all folks on Wall Street are like that but a HUGE percentage are. Nothing wrong with that lifestyle but it is a choice everyone is free to make. Hope this helps everyone.

Obviously Mr. Partnoy lacks one important requirement to continue as a derivatives broker: he possesses a conscience. I have never directly traded derivatives, and after reading this honest expose I never will. In fact, I will never trust ANY full service broker again. Although at times almost benighted in literary quality, Mr. Partnoy's mea culpa reveals far more than it detracts. It is fundamentally a study in the arrogance and aggression of human nature, driven by greed, ego, and the stupidity of youth. It should be required reading by our securities regulators and our representatives on capitol hill.

Partnoy takes the reader through many real-life examples of how greedy, ignorant people can be taken by clever salesmen. He demonstrates the stupid bravado of clients who, for fear of looking unsophisticated, continue to buy what they do not understand. Incredibly, these people are apparently in charge of many other people's fortunes, retirement incomes and lives and they generally behave as gamblers in a Las Vegas casino.

F.I.A.S.C.O. is a great book, so good that I am writing a term paper on it for my Derivatives class in college. Frank Partnoy links the corporate culture from,"LIAR'S POKER", to the derivative disasters of 1994 (I.e., Orange County , Gibson Greeting cards, and Procter & Gamble.) Readers will be surprised by billion dollar deals with Japan that were used to defer default risk as well as create illusionary profits (It's no wonder that Japan is in a recession and the whole Asian economy is in termoil). Patrick Baker

Is the author a Michael Lewis wannabe? Perhaps. Perhaps this not Liars Poker 2, but it is an excellent and involving book which offers insights into the $55 trillion (that's right trillion) world of illiquid OTC derivatives trading. The author does not write as well as Lewis, but he also, blessedly, lacks Lewis cynical egoism and conceit. Think that 401k and pension money you have squared away is conservatively invested in US Treasuries and investment-grade bonds? Think again. The author makes the convincing case that part of all our money now resides in esoteric derivative instruments which look like bonds and have innocuous named like PERLS and CERLS, but if things go mildly wrong could be valueless. This book is a facsinating glimpse into a world most of us know nothing about. I couldn't put it down.