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Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe [Kindle Edition]

Gillian Tett
4.3 out of 5 stars  See all reviews (94 customer reviews)

Print List Price: $16.00
Kindle Price: $11.99
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Book Description

From award-winning Financial Times journalist Gillian Tett, who enraged Wall Street leaders with her newsbreaking warnings of a crisis more than a year ahead of the curve, Fool's Gold tells the astonishing unknown story at the heart of the 2008 meltdown.

Drawing on exclusive access to J.P. Morgan CEO Jamie Dimon and a tightly bonded team of bankers known on Wall Street as the "Morgan Mafia," as well as in-depth interviews with dozens of other key players, including Treasury Secretary Timothy Geithner, Tett brings to life in gripping detail how the Morgan team's bold ideas for a whole new kind of financial alchemy helped to ignite a revolution in banking, and how that revolution escalated wildly out of control.

The deeply reported and lively narrative takes readers behind the scenes, to the inner sanctums of elite finance and to the secretive reaches of what came to be known as the "shadow banking" world. The story begins with the intense Morgan brainstorming session in 1994 beside a pool in Boca Raton, where the team cooked up a dazzling new idea for the exotic financial product known as credit derivatives. That idea would rip around the banking world, catapult Morgan to the top of the turbocharged derivatives trade, and fuel an extraordinary banking boom that seemed to have unleashed banks from ages-old constraints of risk.

But when the Morgan team's derivatives dream collided with the housing boom, and was perverted -- through hubris, delusion, and sheer greed -- by titans of banking that included Citigroup, UBS, Deutsche Bank, and the thundering herd at Merrill Lynch -- even as J.P. Morgan itself stayed well away from the risky concoctions others were peddling -- catastrophe followed. Tett's access to Dimon and the J.P. Morgan leaders who so skillfully steered their bank away from the wild excesses of others sheds invaluable light not only on the untold story of how they engineered their bank's escape from carnage but also on how possible it was for the larger banking world, regulators, and rating agencies to have spotted, and heeded, the terrible risks of a meltdown.

A tale of blistering brilliance and willfully blind ambition, Fool's Gold is both a rare journey deep inside the arcane and wildly competitive world of high finance and a vital contribution to understanding how the worst economic crisis since the Great Depression was perpetrated.


Editorial Reviews

From Publishers Weekly

Starred Review. At once a gripping narrative, an education in derivatives, and a most lucid origin-story for the current financial meltdown, it's no surprise the author of this volume is an award-winning Financial Times journalist. Taking readers back to the invention of credit-derivative obligations (CDOs) at J. P. Morgan in 1994, and the subsequent exponential growth of that market, Tett (Saving the Sun) deploys a remarkable sense of pacing, generating real suspense over rapidly inflating debt on bank balance sheets; by the time Lehman Brothers fails, the book has become a bonafide page-turner. Tett explains how credit derivatives seemed a win-win for the financial world, freeing up capital, increasing profits, and diversifying risk, but makes the missteps equally clear as the industry hurtles toward a largely-unforeseen wave of loan defaults (the worst since the Great Depression). Interestingly, J.P. Morgan was one of a handful of banks sufficiently prescient to imagine this "perfect storm" of simultaneous defaults, and so never became over-reliant on CDOs. Ignoring the tacked-on, preachy epilogue (in which Tett advocates her specialty, social anthropology, as a way to avert future such crises), Tett's explosive, illuminating narrative is the one to read for anyone confused by the present financial mess.

Review

"The author excels at recreating this fevered environment. She also deciphers Wall Street mumbo-jumbo in terms that a lay reader...can understand." ---The New York Times

Product Details

  • File Size: 464 KB
  • Print Length: 305 pages
  • Page Numbers Source ISBN: 141659857X
  • Publisher: Free Press; Reprint edition (June 9, 2009)
  • Sold by: Simon and Schuster Digital Sales Inc
  • Language: English
  • ASIN: B002AQRVXQ
  • Text-to-Speech: Enabled
  • X-Ray:
  • Word Wise: Not Enabled
  • Lending: Not Enabled
  • Amazon Best Sellers Rank: #172,755 Paid in Kindle Store (See Top 100 Paid in Kindle Store)
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Customer Reviews

4.3 out of 5 stars
(94)
4.3 out of 5 stars
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Most Helpful Customer Reviews
101 of 110 people found the following review helpful
By S. Yang
Format:Hardcover|Verified Purchase
Having read this book over 3 days (interrupted only by work, playtime with my two toddlers, and sleep), I highly recommend it to anyone who cares about our financial system (be it that you work in finance, or hate financiers that brought us the ruins - just bear in mind they were not the only ones to blame, throw in the regulators, lenders, and borrowers who enjoyed the party, and politicians who took credit for the housing boom). The book is well-written, focused, and surprisingly a page-turner that you don't want to put down once you start reading it.

Having fought the battles in the trenches over the past two years during the ongoing financial crisis, I have a deep appreciation for what Gillian Tett has accomplished in this book. It provides a comprehensive view of one corner of the financial markets - the one that caused so much of the wreckage over the past two years. While it will be a daunting task for any single writer to document the crisis we are still going through (given the multiple contributing factors/actors to this crisis), the author has done a great job producing a contemporary record on the credit derivatives market and its role in fueling the housing bubble leading up to the crisis.

Obviously, the author deliberately chose to exclude some critical episodes of the credit crisis (such as the SocGen trading scandal, the resulting ill-timed massive cut in Fed funds rate leading to the oil shock of 2008 that partially contributed to the inflation scare and added shock to the economy).
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177 of 204 people found the following review helpful
3.0 out of 5 stars Not as Good as it Appears May 26, 2009
By EWC
Format:Hardcover
I loved the documented history this book provides. It's a treasure trove of dates, quotes and important juxtapositions on the development and unwinding of structured finance. I turned the pages and you will too. But in the end, I was disappointed by the author's superficial understanding of the underlying issues. She wants to argue that the banks used clever innovation to exploit big loopholes in Fed and Basel regulations and to arbitrage ratings but she doesn't have a deep enough understanding to truly explain how this was done. As a result, she ends up contributing to the general populations' great misunderstanding of these markets.

Pages 61 to 64 provide one of many examples. She concludes at the top of page 64, "Banks had typically been forced to hold $800 million in reserves for every $10 billion in corporate loans on their books. Now that could be just $160 million. The CDS concept had pulled off a dance around the Basel rules." Regulators and rating agencies aren't that naive! Three pages earlier she notes that the issuer of credit default insurance had to post $700mm of collateral, held as Treasuries, and that the Fed demanded that the issuer either had to have a triple AAA rating, i.e. the capacity to absorb losses greater than the $700mm it posted as collateral, or else the bank had to post an addition $160mm of reserves with the Fed, over and above the $700mm. The logic of this requirement is obvious, either way, someone, the bank or the insurer, had to post at least $800 of reserves. There is a popular belief that AIG posted no collateral but the truth is that while, it in part did not post liquid collateral, it in fact posted the value of its other businesses as collateral. The Fed, of course, took those businesses as collateral in exchange for posting liquid collateral.
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9 of 9 people found the following review helpful
Format:Hardcover
If you want to understand the current economic crisis, this book is a fascinating and well written narrative which personalizes the crisis from the JPM point of view. It also suggests and invites serious dialogue about the way by which the banking, regulatory and investment world conduct themselves. If one can extrapolate lessons to broader concerns about human folly related to global social areas, all the better.

Gillian Tett's book Fools Gold covers the current financial crisis from its purported beginning in 1994 to the point at which most of us became aware of the systemic flaws in the global financial systems, with an inside look at the crisis from J.P. Morgan's version of the story.

The book begins by engagingly and sympathetically introducing us to the players on the banking and investment side of the equation; the team of collegiate, young, impassioned and idealistic folks at J.P. Morgan responsible for creating and marketing credit derivatives back in the early 1990's. It loosely follows the team, and more interestingly, follows the firm's evolution through the 1990's (with an admiring nod to Jerry Corrigan's concern regarding risk) and subsequent leaders (with a resounding `hurrah!' to Jamie Dimon and his `hands on' management style) and the industry excesses outside of JPM that, combined with a crisis in confidence in the financial markets, have created the worst financial crisis known since The Great Depression.
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Most Recent Customer Reviews
5.0 out of 5 stars In 2008 Gillian Gett received the British Business Journalist of ...
In 2008 Gillian Gett received the British Business Journalist of the Year Award for her coverage of the 08 Collapse. Read more
Published 1 day ago by Cline Russell
5.0 out of 5 stars A journey into the world of derivatives through J.P. Morgan
An insightful book on how the 2008 financial crisis was enabled mostly by the work of the derivatives team at J.P. Morgan beginning in the 1990's. Read more
Published 5 days ago by D. Olson
5.0 out of 5 stars A thrilling read for all
A must read for those eager to get a deeper understanding of the 2008 financial crisis, and how exactly did we get there. Read more
Published 7 days ago by Roland Pettersson
5.0 out of 5 stars Well done!
Well done. Excellent service
Published 1 month ago by Teddy S
4.0 out of 5 stars This book should be a wakeup call for today's investors and financiers
For another view of Wall Street tyranny and tomfoolery this is a pretty good read. Maybe I am jaded at this point, having read about eight books covering the period in the book... Read more
Published 2 months ago by M. P. Henley
4.0 out of 5 stars Four Stars
As expected, and quick turn around. Thank you.
Published 6 months ago by David Sanner
2.0 out of 5 stars Two Stars
ok
Published 6 months ago by gerard
5.0 out of 5 stars Our Anger explained
Very informative..but does make you angry
Published 8 months ago by JennyB
5.0 out of 5 stars Gillian Tett shows that an anthropologist can provide a different ...
Gillian Tett shows that an anthropologist can provide a different and extremely insightful perspective on the causes of financial excesses.
Published 10 months ago by Carlos M dela Cruz Sr
1.0 out of 5 stars For a book that tries to diagnose the causes of ...
For a book that tries to diagnose the causes of the financial crisis and even talks about complex financial products as "Fool's Gold", it weirdly ends up being a... Read more
Published 11 months ago by erghammer
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More About the Author

Gillian Tett oversees global coverage of the financial markets for the Financial Times, the world's leading newspaper covering finance and business. In 2007 she was awarded the Wincott prize, the premier British award for financial journalism, for her capital-markets coverage. In 2008, she was named British Business Journalist of the Year. She previously served as the newspaper's deputy head of the Lex column (an agenda-setting column on business and financial topics), Tokyo bureau chief, economic correspondent, and foreign correspondent. She speaks regularly at conferences around the world on finance and global markets. She has a PhD in social anthropology from Cambridge University. In 2003, she published a book on Japan's banking crisis, Saving the Sun: How Wall Street Mavericks Shook Up Japan's Financial World and Made Billions.


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