Customer Reviews

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street

5 star:		(21)
4 star:		(26)
3 star:		(18)
2 star:		(18)
1 star:		(11)

 

 

I have been a banker for 20 years and have specific experience with asset backed securities so I think I am better prepared to read this book than most, but certainly not all, people.

Cohan writes with great flair and a style best compared to celebrity profiles in Vanity Fair. He clearly had extraordinary access to former BSC execs, especially Paul Friedman and Jimmy Cayne. It seems like one of these two is speaking in verbatim quote most of the time. I learned a lot and thoroughly enjoyed reading the book. That said, I'm not comfortable with the book. It's half the story selected because the bits make for a dishy, dirt rich read. To me, Cohan was more concerned about writing a best-seller than he was about telling the whole story in some sort of reasonable context.

I agree with the reviewer that said the book was rushed into print. The editing, especially in the second half is pretty bad. There are repeated references to antecedent events that must have ended up edited out, e.g. a reference to "the Tuesday 'Times' article" when there was no prior mention of any such article- stuff like that. There are many occasions where the events are conformed to the narrative and Cohan bounces around in time and sequence and new players come into the story seemingly out of nowhere.

I also got the feeling Cohan wasn't a master of his subject matter at times and "blew through" an event or key concept. If I were in the audience and Cohan was presenting his book, my hand would have gone up and I would have said, "Wait a second, . . ."

The first third of the book covers the last 10 days of the firm and spends a majority of its time talking about the repo market, without any explanation of how the market works or what its abundant jargon translates into English as. Without a Money & Banking text at their side, 98% of readers will be lost and left to focus only on personality clashes, amazingly foul language (even in the context of a trading floor) and petty intrigues. I think that is what Cohan wants.

On the plus side, Cohan lets former BSC CEO Jimmy Cayne speak and speak and speak. Cohan doesn't need to hang Cayne, Cayne hangs himself.

Cohan only quotes sources who blame the sub-prime debacle on lending to minorities and the poor. That contention has been thoroughly debunked with lots of hard data. Cohan ignores that and in doing so does a disservice to minorities, the poor and readers who want to understand what happened.

The book is 30 or 40 hours of page turning reading pleasure. However, it is not the definitive historical text. Before you read the book spend 30 minutes on the net refreshing yourself on the repo market, its participants and mark to market accounting.

"House of Cards" reports on the collapse of the investment banking house Bear Stearns (America's fifth-largest investment bank), and the beginning of the worst banking crisis since the Great Depression. Cohan's background as an investment banker allows him to cut through the complexity to explain what happened in simple, clear terms.

Bear Stearns had survived every crisis of the 20th century, including the Great Depression - without a single losing quarter - until the end of 2007. In 1997, Bear Stearns had helped pioneer the subprime mortgage-backed security by serving as co-underwriter on a $385 million offering. By the mid-2000s, it was the market leader in this segment.

The focus of the book is the last ten days of Bear Stearns, leading up to its absorption by J.P. Morgan at a fire-sale price ($10/share, down from $167; less than the value of its $1.5 billion office building), greased by $30 billion in Federal Reserve funds. (The Fed was worried that a bankruptcy of Bear Stearns could wreak fiscal havoc around the world.)

Just a year earlier it had been identified as "America's most admired securities firm" by Fortune magazine; in 2006 its Asset Management fees had reached $335 million. Bonuses were in the 8-figure range. Unfortunately, it was also the most heavily invested in mortgage-backed securities. Bear Stearns, like its competitors, financed itself with oversight sources (the cheapest source).

However, when analysts began questioning Bear's viability, given its shaky mix of assets, continued financing for Bear dried up, and it toppled. Amazingly, its chairman was too buy playing bridge and golf to get involved until too late; earlier he had forced out the only many who understood what was going on. The firm even turned down a last-minute offer from a Saudi Arabian for substantial financing ("not needed"). Its leadership then blamed the media and short-sellers for Bear's demise.

True, Bear's fall was quite rapid. However, there had been warning signs - problems at smaller firms with similar asset structures, rising risk premiums for its mortgage bond holdings ($50,000 for $10 million during the first half of 2007, rising to $350,000 on 3/5/08), its first quarterly loss at the end of 2008, and the downgrading of some of its bond holdings. Worse yet, Cohan also alluded to failing to conserve cash by reducing dividends and ceasing stock buybacks, as well as increasing leverage - unfortunately, it is not clear whether he was referring to Lehman, Bear, or both.

The bad news - the 468 pages, complete with endless interviews and accounts of bridge games, is a bit much. The even worse news - Bear Stearns' and others playing for billions has left American taxpayers with a debt of trillions. And we still haven't heard "the rest of the story."

Cohan details the bursting of the bubble in a book that reads like part gossip columnist, part financial thriller. Talk about making your average Jane feel smart, Cohan makes the big names of Wall Street look like a bunch of rats scurrying about thinking they have won the cheese when really they are about to get the big, gut-popping smack-down.

I enjoyed this read because, aside from being mildly fascinated by economics, it does seem to answer the question that most American are now asking as they look at their 401Ks, retirement plan statements, and now-empty stock portfolios: "What the hell were they thinking?"

Calling it a 'House of Cards' is quite apt as Cohan shows us how multi-million, er, make it billion, dollar empires were built on quicksand: stuff backed by things backed by more stuff, sorta.

This is some seriously fascinating stuff- many of the chapters read like a financial drama cum thriller. Cohan puts the reader in the middle of the action: the "Wehrmacht" SWAT team of Bank of America 'parachuting into the downtown offices of Sullivan & Cromwell' to review Lehman's books, an edge-of-your-seat account of the weekend that the Fed, specifically, Geithner and Paulson- try to anticipate the consequences of the scenarios (which includes some pretty candid quotes right from the source), you can almost hear the jaws drop as Wall Street is informed there will have to be a "private sector solution" i.e. no bailout for Lehman Bros., the scramble to broker a deal with Barclays to take on the bulk of Lehman, the refusal of the FSA(the UK's version of the SEC who needed to okay the deal) to accept the deal, the back-room conversations exuding palpable fear as CEOs from some of the largest firms considered who might be the next to fall, the thirteenth hour desperation of Lehman execs trying to make a case for a federal bailout, and finally the reality of bankruptcy and no calvary riding in... and, of course, Lehman's was sold to Barclays under the supervision of the bankruptcy court.

While Cohan's book is both entertaining and enlightening, the real value I see here is he does a pretty good job of shoowing us how we got here... why this bubble was different from the others. It's all well and good to say that hindsight is 20/20 but ultimately we're all living with the consequences of the decisions made by a very elite few.

I got through this in one day- the writing is excellent. Very straightforward with the facts without waving around the blame stick too much- it's there in the title, though. Definately, if you are going to read even one book about how we arrived at this financial crisis- this would be a great choice.

After having much enjoyed books like Liar's Poker and Barbarians at the Gate, I had high hopes for this book, and was much disappointed. It seems like a very good book is lurking within.
I had a summer job on a trading desk and have an MBA, so I have some sense of how the relevant parts of a firm like Bear function. I did not learn more and I think any one with less background would learn less.
To list some things that I think I (and others) might want to know:
1. If Bear Stearns has $17 billion in cash (liquid assets), why is it borrowing about $30 billion every *day*? From whom? Why? What does a firm like Bear do with $30 (or 20 or 40) billion of cash? The author reports how firms like Bear and Goldman do this, but never explains why. He lists the names of firms that supply said cash, but just explains that some banks have deposits (e.g. a B of A type firm) but others like Bear doesn't. Even this explanation doesn't hold much water -- why are Citi and B of A in such trouble then?
2. There is no back story about Bear. It was known as a bare knuckles firm. It's such a contrast to Liar's Poker and Barbarians. I'd argue that it's pretty hard to understand what happened at Bear, etc., if you don't have some sense of what traders do and what a trading desk like. He just tosses in parenthetical conversations with "hey, how are we doing" or "I know things are bad when traders start lying to me", but it would be like trying to understand Mick Jagger without understanding what it's like to be a Rolling Stone. (I'm not saying traders are rock stars, but to cite another example, consider Bonfire of the Vanities -- they do live a different reality than most of us, when they may gamble $500 million or the like, or take home $25 million in salary one year).
3. There are interesting characters floating about who seem to merit no examination. He off-and-on again cites one portfolio manager with a multi-billion portfolio who works out of a "strip mall". Really? Why? In contrast, Bear has a lavish new headquarters. Yes, the strip-mall guy comes from Drexel (a failed firm) but so did some Bear folks, of course. In contrast, the woman who blew the whistle on Citi is having lunch at Nobu after getting her hair done at salon which I assume is an elite one. Do folks know how elite of a restaurant that is? Similarly, he has Cramer of Mad Money touting Bear as something to hold onto as it tanks. It seems either of these characters would have made good stories, but like so much, it feels like details are thrown out about them simply to supply details, not with any sense of providing true foils to other players. Jonathan Stewart obviously got a bit more thoughtful about Mad Money.
Folks like Lewis wrote far superior books. You got a sense of how these firms work; how the personalities of the characters merge with the identities of the firms; how the prior successes of these individuals and firms lead to the types of mistakes they make. You also learn about what a trader does or what a private equity firm does.
If you know what these firms do and what Nobu is, etc., then this book provides more details about individuals. If not, I don't think you learn much. It's too bad; the information is all there, and Bear continues to be relevant.

I am a lawyer but not very knowledgeable about securities or finance. This book did not enlighten me more than the newspapers about the fundamental reasons for Bear Stearns' breakdown. With respect to the surface events, however -- the "time line" -- the author provides mind-numbing detail. The book could have been half as long (and a much better read) had it been well edited. Time and time again, one reads the same anecdotes, often in almost the same words. It's one thing to provide multiple perspectives on the same events, quite another to have people with the same points of view quoted saying virtually the same things over and over. The 250 pages that could have been released by tight editing would have afforded an ample forum for explaining how things worked in this high-flying world for those, like myself, who were not a part of it. This book is an opportunity missed. I was very disappointed by it.

What is one to make of a book whose first sentence reads, "The first murmurings of impending doom for the financial world originated 2,500 miles from Wall Street in an unassuming office suite just north of Orlando, Florida." I know Wall Street isn't 2,500 from Orlando, but I checked Google Maps for a precise number. The distance is 1,081 miles.

Need I say more?

House of Cards is interesting to those of us fascinated by the collapse of BSC and subsequently the world financial markets. But it definitely feels like it was rushed to market.
Many anecdotes are repeated nearly verbatim when the author wants to make a different point about the incident. Nearly every time I picked the book up I was convinced my bookmark must have fallen out and I would have to search back a chapter or so to discover that it was simply the author repeating a story.
Large sections are lifted right from discussion forum posts by anonymous writers. Reading all these comments offers about the same level of entertainment as reading any anonymous financial comments on the Internet (reasonably high for me) and about the same level of financial analysis (low).
Wait for a more definitive work, which House of Cards certainly isn't.

The title of this book amuses me. It refers simultaneously to the fixation that Bear Stearns' leaders had on playing championship bridge and to the fact that the company's debt structure was a house of cards that could come down with only the slightest shift in the wind.

I recently went to a graduate school reunion and one of my classmates proudly told me that his daughter had gotten a job working at a major investment bank for two years. I felt like laughing. Why would anyone want a child to work at an investment bank?

As I read House of Cards, I resisted (with difficulty) the urge to send a copy to my classmate. I'm sure it would have been quite an eye-opener for him.

If you read most of what was published about the collapse of Bear Stearns as it occurred and have a pretty good sense of the current problems in the financial system, you won't find anything new here except for gossipy details about how clueless the leaders at Bear Stearns were about their circumstances and what needed to be done. If you like gossip about people failing to do their jobs and their personal foibles, this book is pretty good for teaching you what much of Wall Street is like.

If you want to know more about what happened at Bear Stearns and why from a financial or economic point of view that goes beyond what has been published, this book will be a waste of time for you.

For those who just want the gossip, they will probably find the book to be longer and more detailed than they need. For those people, my advice is to just read chapters 1-12 and 25-29. That will give you enough for a sense of this story of how those who felt mighty fell.

What happened in a nutshell is that Bear Stearns (like many Wall Street firms before it) believed itself to be invincible and didn't spend much time looking at what might go wrong. When evidence suggested any problem, the leaders ignored the evidence and looked to maximize short-term profits (even if those might lead to huge losses in the future). If their gambles (based on mountains of short-term debt) didn't work out, they probably assumed some other investment bank would pay them tens of millions a year to start all over again making the same kinds of gambles. It's a lottery where those who run the lottery feel they will always win . . . even if the investors lose. This time some of them were wrong, and they paid the price.

It will be fun to see this story rewritten after banks and insurance companies finally admit that they have lost many more trillions of dollars than anyone is willing to talk about now. I suspect the Bear Stearns story will look less awful then than it does now. Why? The greatest financial misdeeds in this financial crisis may well be ahead of us, not behind us.

Don't bet more than you can afford, no matter how good your cards look!

The title & sub-title of the book are very catchy but totally inappropriate. The book is entirely -- except for the 24 pages of 'Epilogue' -- about Bear Stearns, but never really shows how it was a 'House of Cards' or describes much where 'hubris' and 'wretched excess' were. I have learned from other sources that most of the activities in which Bear Stearns was engaged for decades were legit and not particularly risky until it got more and more involved in mortgage-based securities which were increasingly based on "NINJA" or "liar" loans. Strangely, this book does not delve in the subject of these mortgages. No details on this topic! The closest the author comes to this subject is in talking about two hedge funds which were really a tiny part of the company.

Most of the book is regurgitation of contents of numerous interviews author conducted. Those interviewees do not reveal what was at the core of the progressively-rotten financial structure of the firm -- calling your assets a load of "funky s---" is not revealing -- and the author does not provide any over-arching narrative to fill-in the gaps nor digs deeply thru other means.

The book is undigested glob of not-so-pertinent information, with a lot of repetitions. It also seems rushed with glaring errors. For example, Ch. 11 is titled "New Development from Hell" but actually describe a windfall for Bear Stearns due to legal sloppiness of JPMorgan.

Don't go for this book. You will learn more, in much less time, by reading a few articles on the subject by journalists like Kate Kelly of WSJ.

As others have pointed out, the author clearly had high level access to BSC executives and, as far as I can tell, he seems to understand what happened. But that's where the compliments end, because this book was only half written when it was printed. At least one reviewer has already pointed out that the editing tends to get sloppy towards the end. But even worse is that the "book" is nothing but a steady stream of 5 line quotes from 10-20 people. The author doesn't tell a compelling story--he just compiled hours and hours of interviews and sort of cut and pasted them into chronological order. The result is very little analysis and explanation--which for non-bankers is important--and certain points are repeated over and over again in the voice of yet additional bankers. It's a chore to slog through a 450 page book that should've been 200 or so (though I guess the longer the book, the more you can charge).

As a quick test, next time you're in a bookstore or even on Amazon's "check inside" feature, do a quick run through and see how many times you can find a paragraph that doesn't end with a 5 line quote.