Customer Reviews

Saving the Sun: A Wall Street Gamble to Rescue Japan from Its Trillion-Dollar Meltdown

5 star:		(10)
4 star:		(5)
3 star:		(4)
2 star:		(1)
1 star:		(0)

 

 

Saving the Sun is about the corporate culture of Japan's financial industry and how it is changing. Gillian Tett focuses on one institution, The Long Term Credit Bank, to illustrate what happened and how the financial environment in Japan is changing.

The LTCB was a key player in Japan's post war miracle. It lent money to fund business operations and new ventures, working in close cooperation with the elite bureaucrats of Japan's Ministry of Finance and Ministry of International Trade and Industry. Then in the 1980s, drunk on its spectacular success, Japan Inc. excessively invested in thoughtless projects, all funded by the LTCB and the rest of the financial industry, with no thought at all given to making money. Prestige was everything.

As a result, the Japanese financial system almost collapsed; what survived had to change. Banks began failing despite attempts by the Ministry of Finance to organize rescues. Some failed banks were nationalized, among them the LTCB; these institutions were then put up for sale but no one in Japan wanted them.

There were tragedies. Katsunobu Onogi, a fatherly and admirably responsible gentleman of the old school, was arrested and charged, spending a month in custody before being found guilty and sentenced to three years in jail, suspended. A colleague, Takashi Uehara, committed suicide, which in Japan is a gesture of atonement, not an escape. At another bank, the president parachuted in from the Bank of Japan, Tadayo Honma, also killed himself again to atone for the system's failure.

Then Tim Collins's Ripplewood, an American fund, arrived and offered to rescue the LTCB. This was politically difficult. The Japanese don't like foreign ways, and the thought of a pillar of Japanese finance being bought out by foreigners provoked public outrage. In the end MoF had no choice and the deal went through.

The bank was renamed Shinsei, meaning "Rebirth" in Japanese. A remarkable man, Masamoto Yashiro, was hauled out from a second retirement after a full career at Esso Sekiyu (Exxon's Japan operation) and the creation of Citibank's Japanese retail business, to oversee the reconstruction. Clash was inevitable. The conservative rank and file employees had no idea how to work with the hyperactive can-do go-go-go managers now running the show. A new Indian head of IT, Jay Dvivedi, junked the old mainframes and installed, in mere months, a new state-of-the-art system featuring PCs on every desk and instant access to whatever reports management wanted. The corporate planning department, which decided new products, disappeared: henceforth Shinsei would listen to its customers to determine their needs.

The financial revolution isn't over. Shinsei's success wasn't total. Major clients were allowed to fail, Sogo department store went bankrupt. Politicians blamed Shinsei for not being kinder to its debtors.

I've worked for the IT departments of foreign banks in Japan since 1995 so this book strikes particularly close to home for me. I can even see the Shinsei headquarters from my desk. Interesting and informative. Recommended.

Vincent Poirier, Tokyo

A well written, very easy read which captures a lot of information in a relatively short book, each section (1-LTCB's rise 2-The sale/purchase 3-the transformation) could be a book on its own. While I accept that this book could not go further into MOF's failure to regulate as it should have done, Gillian makes it clear that this book is the history of one bank not the Japanese financial system, I wish she had been able to do so and I also have to agree with John Zwaanstra's comment that the bad debt work out should have been gone into in greater depth. Still, without going for thousand pages into all the complex issues the book captures nearly all the different pressures that played into decision making and makes one think about the results from a variety of perspectives.

In sum, I greatly enjoyed reading it and strongly recommend it.

Overall Tett has done an exemplary job in summarizing the basic events surrounding LTCB / Shinsei. Her access to senior Japanese management of the old LTCB is particularly impressive. No Japanese journalist has gotten such close personal access to the men involved. In addition, her book provides very thorough background of the history of Japanese banking right up through the "bubble" years. Tett's book , however, does have some shortcomings. First and foremost, she overstates the role of Yashiro and drastically understates the key role of Chris Flowers and Brian Prince in the bad loan cleanup phase. Those two, more than anyone else, deserve credit for doing the really tough work. Moreover she appears to have fallen under the spell of the very glib Tim Collins and therefore has exaggerated his contribution as well. Collins is essentially a money raiser, he is not the architect of the LTCB/shinsei deal. Flowers again deserves the credit here. Perhaps Tett missed this because Flowers is famous for his reticence with the press. Lastly Tett seems overly focussed on the (gasp!) fact that some financial sector employees in Japan (gasp!) frequent strip clubs and hostess bars. I guess she hasn't been out on the town in London or New York recently....

SUMMARY: Good general chronological summary and overview but lacks deep understanding of key element -- the bad debt workout.

As others have commented, Saving the Sun provides a good chronology to the LTCB takeover, a significant event in Japan's recent history. But there are problems with the book. I lived in Japan during most of the 1990s, and Tett's constant pigeon-holing of the Japanese and American attitudes contains some truth but is exaggerated and becomes tedious. (Even the title is an exaggeration.) Tett may be a financial journalist, but there are enough errors that one questions her expertise on the subject matter. In addition, it is difficult for the reader to get a sense of the scope in some sections as numbers are almost never provided within a clear context. For example, Japan's debt may be "horrendous" although its savings may be "staggering." What is the horrendous/staggering ratio, and how has it changed? Still, readers interested in Japan should read through the shortcomings because the anecdotes Tett provides are interesting and the story itself is important to understanding what is happening inside Japan's financial sector today.

"I would put an exclamation point at the end of all these sentences! On this one! And on that one!"

The above speech from Seinfeld's Elaine pretty much sums up my feelings regarding Ms. Tett's attempts at "writing". I feel like Franklin Dixon (yes, he of Hardy Boys fame) wrote this account of LTCB/Shinsei. Much of the dialogue (whether direct quote, questionable translation, or fanciful conjecture) is peppered with inappropriately many exclamation points, making the story sound like a teenage mystery adventure novel.

Aside from the unnecessary dramatization, and the author's tendency to intersperse good economic analysis with poorly considered social commentary about Japan, the book is informative and interesting. If you are interested in learning about the main players in the Shinsei drama, and learning a fair bit about the differences between Japanese and western political and financial systems, then this book is definitely worth the three stars I am giving it.

I just finished reading Saving the Sun, and today (2004-Feb-19 in Japan) Shinsei actually completed the IPO mentioned in the book. The shares were offered at the upper end of the range, and traded at a 66% premium. It looks like Collins, Flowers and Co. will be making a handsome profit for their investors, after all.

Let's wait and see #1: let's see if New LTCB Partners CV (Netherlands) is allowed to get away with paying zero tax in Japan.

Let's wait and see #2: let's see if Japan ever allows foreign investors to get this much control in this profitable a local investment ever again.

Let's wait and see #3: let's see if the Shinsei experience has any lasting (positive) effect on reforming the Japanese financial system -- history says it won't, but we keep hoping.

Finally, one material transgression worth noting is the author's reference to Anil Kashyap of "Chicago University". Professor Kashyap is certainly a good teacher and a great researcher, but we prefer to refer to the institution as the "University of Chicago" -- please take note for the 2d edition, Ms. Tett.

A lot has been made of the fact that Gillian Tett, Financial Times journalist and author of Fool's Gold, was trained as a social anthropologist. She herself acknowledged that, while studying the J.P. Morgan "tribe" who invented the CDOs, she focused on the rites and social behavior displayed during the conventions, conferences and retreats that she was able to attend as a participant observer: these gatherings are to the banking world the equivalent of the marriage ceremonies of the clannic tribes she studied in Central Asia.

So did her training in anthropology bear on the first book she wrote, after five years as a finance correspondent in Tokyo? The answer is yes and no. Her sensitivity to cultural difference allowed her to weave a nice narrative described on the book cover as a "classic tale of East meets West". But she doesn't question the cultural clichés that are so often made about Japan; nor does she take a critical stance on the abuses and malpractices of foreign bankers in Japan, preferring to concentrate on the dysfunctionings of Japanese capitalism.

Anthropology often develops a discourse that is critical of market capitalism and economic rationality. To social scientists, Japan often appeared as a model because it combined strong economic performance with an equalitarian society that put strong values on human relationships. But after the "lost decade" of the 1990s, the Japanese model has faltered, and it is nowhere to be saved. Although she reckons in the introduction that the American system also contains flaws, Gillian Tett insists that if one side has to change, it is Tokyo, not Wall Street, that must make the adjustment.

One should not expect a Financial Times journalist to express vocal opposition to Anglo-saxon capitalism. Keeping a value-neutral position, and staying clear of ideological debates, is indeed a good thing, and some anthropologists should well follow suit. But Gillian Tett glosses over foreign responsibilities in the severity, depth and duration of the Japanese crisis. During the 1980s, foreign investment bankers helped the Japanese banks and real estate companies acquire properties overseas, and contributed to the inflating of the bubble on the domestic market. In the post-bubble period, those same investment bankers helped Japanese companies to cook their balance sheets and to temporarily improve their accounts by sweeping non-performing assets under the rug. These accounting games only made the situation worse by deferring the resolution of the crisis. No surprise that in Japanese eyes, Anglo-saxon capitalism came to be associated with unfettered greed and legal trickery.

This being said, Saving the Sun is sensitive to cultural difference. Gillian Tett makes it clear that her Japanese characters think, feel and act differently from the Americans. She doesn't pretend to have developed a special expertise on Japan, or to offer a new thesis on the roots of Japanese behavior. What she does is to develop upon the received wisdom and conventional knowledge about Japan. Social traits, cultural norms and historical references are not presented in isolation; they are woven into the narrative, and they serve to illustrate points that are relevant to the understanding of the story. Giri and ninjo, tatemae and honne, nemawashi and gaiatsu, kisha clubs and keiretsu, shukan tabloids and yakuza: all the familiar norms and institutions of Japan make their appearance in the text, along with the historical episodes of Japan's opening to the West. Again, whereas anthropology texts often adopt a critical perspective toward these tropes, Gillian Tett takes them at face value, which is not necessarily a bad thing.

Although written by a person trained in academia, Saving the Sun is not an academic book. This doesn't make it worse, nor better, than other books that might have taken a more brainy approach to the subject. Culturally sensitive, ideologically neutral, and based on solid research, it contributes to our understanding of a complex situation.

In the 1980's, Japanese business could seem to do no wrong. From business publications such as The Wall Street Journal and Forbes, to the mainstream press (Newsweek, The New York Times and CNN), the press wrote glowingly about Japanese business. For over a decade we read that our western practices were too short sighted and antiquated- we clearly needed to take a more "Japanese approach" to doing business, and in so doing, could be successful as they have been.

But a short time later Japanese companies were in big trouble in the US and back in Japan. Their stock market crashed, the real estate boom crashed, and the entire Japanese economy seemed to be not just in serious trouble, but in a meltdown of catastrophic proportions. What went wrong?

This book does an extremely credible job of explaining both how and why, and in simple layman's terms that anyone can easily understand. Using many specific examples, Gillian Tett shows how American and Japanese thought and business practices are polar opposites. These differences are not just a matter of the differences in culture between east and west--they go considerably deeper. But by the end of the book, the results were able to speak for themselves. By bringing in a new international management team made up of Japanese, American, Indian and Australian management, an insolvent bank that had been bought out for the first time in history by a group of western investors (!!) became a success story.

I'm an investment banker myself that has (in previous lives) worked for two different Japanese multinationals over a 7-year period in the 80's and 90's. My own experiences with Japan are mixed. I made some great friends, and have developed a high level of respect for their work ethic and their dedication to their employers, and usually, to each other. But in my opinion, the extreme xenophobia that permeates Japanese culture will not be lessened anytime soon. The term "gaijin" when politely translated means "foreigner." But to many (but not all) Japanese the term is not polite at all.

Get this one. I don't give out many "five star" ratings, but I so for this book without quibbling. I look forward to future works from Ms. Tett.

I don't usually read books like these but I decided to purchase it anyway. How can something as dry as Japanese banking reform be interesting? Well Gillian Tett made it interesting enough. As with her style of writing, I note that the chapter headings fully telegraph what is about to take place in the narative, I thought, well whats the fun of reading on if you know what is going to happen? With that, Tett's narative is replete with all the drama one can ever read in a good novel. There are deaths, gangsters, flamboyant characters, politics, society, culture clashes, and mix in with all of this, economics.

The Japanese are suppose to be the smart ones. They excel in many areas requiring technical knowledge. The media never misses an opportunity to point out how inferior Americans are when it comes to math and such knowledge. I was therefore amazed when I have read that the Japanese don't have a grasp of the simple relationship between risk and return. I would have thought that they'd have overly complicated financial models using high level math. But it turns out that, from my perspective, the way the LTCB bankers did business was bizarre. Why would anybody be paternalistic when it comes to money?

I won't spoil the ending but it seems obvious from the title of the book what will unfold, in fact, it is the heading of the final chapter. I belive but am not sure that the paperback has an epilogue, revisiting the many chracters as further back as 2004. There are classes offered at university focusing in Asian economics and also Japanese economics as well. Gillian Tett's tract would be apposite as reading material if you are into that.

"Saving the Sun" is a masterful work detailing not only the reasons for the collapse of the Japanese banking system, but of the problems encountered by bankers and investors from disparate traditions seeking ultimately to speak one economic language. One of the major reasons why the book resonates is due to the unique qualifications of Gillian Tett to pen such a challenging work about a nation which, to many westerners, remains shrouded in exotic mystery. Tett was trained as a social anthropologist, gravitating into journalism and rising to become Tokyo bureau chief of the prestigious Financial Times.

Tett is able to wear two hats simultaneously, providing us with a more entertaining as well as informative work due to her sociological as well as economic insights. Rather than supplying a series of charts explaining what happened to Japan's banking culture, Tett instead supplies an informative analysis of events by focusing closely on the movers and shakers from Japan and America involved in the volatile existence of Japanese banking from the nation's crushing defeat in World War Two to post-9-11.

The tide of events is organized into basic categories, all flavored with the insight of a trained financial journalist telling her story in the manner of a perceptive novelist. The story is seen from the perspective of Long Term Credit Bank, one of the nation's most revered institutions, which soared like an eagle during Japan's heady days of economic expansion, then descended like a wounded duck in the wake of a sea tide of bad loans occasioned in large measure by inflexible cultural traditions. When its hapless president, LTCB veteran Katsunobi Onogi, was ultimately arrested and successfully prosecuted for covering up series' of bad loans concerning which he was expected to take diligent action, he lamented that he was victimized by a tradition that mandated such an attitude. Tett reveals the tragic results of a tradition in which, whereas Swiss and American bankers expected losses to be written off and no more money extended to the distressed subsidiary banks and companies, the powers that be believed that the economic system should be treated as a family. To cut off such institutions involved, in the Japanese view, a divorce rather than a necessary business move.

Tett demonstates the markedly different ways that the Americans and Japanese see the overall economic picture, along with basic differences in how work forces are observed, when she writes about the purchase of the collapsed LTCB by an American team led by Kentuckian Tim Collins, friend and confidante of President Bill Clinton. The American group led by Collins changed the name of LTCB to Shinsei, then set out to achieve a profound positive change. Never is the disparity between American and Japanese cultural viewpoints more evident than when Collins and a team of Americans decide to have lunch in the bank canteen. The extroverted Kentucky business giant and his group, which includes Vernon Jordan, seeks to socialize with members of the work force, who have never seen such a display in their lives, sticking to their own small clusters of co-workers and disdaining fraternization.

Gillian Tett has provided the reader with a great service. This book provides an opportunity to understand the economic strategies of the Japanese economic system and the cultural divide that often permeates interaction with Americans who disdain tradition for a practical "bottom line" operating pattern.

Tett did a great job in writing this book. Collins, Flowers, Yashiro, Reed, Volker, Onogi, Jordan, Summers, Rockefeller.... read like a list of who's who in Global Finance.... It is a page turner. Ripplewood bought the bankrupt LTCB Japanese bank and turned it around. It serves as a blueprint for US and global investors. Tim Collins started this venture but there was little mention about his contribution in the later part of the book. The ending seems too short.

Ripplewood Holding is traded on the stock market after Tim Collins raised $1 billion in IPO, the stock symbol is RHJIF, about $27 per share. This is a stock of a combination of Japanese firms. Will you buy it???