Customer Reviews

Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the FinancialSystem--and Themselves

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This is an excellent book that reads like something that Dan Brown might have written. But its real. The part that amazed me was the level of detail Sorkin was able to get about behind the scenes conversations that took place. Stuff about how people such as Dick Fuld of Lehman reacted to the problems when it was becoming clear that the company was going down and he was in denial. How Paulson was reacting to things when there were no rules about what to do.

But probably the most interesting parts were how the different personalities were reacting while the ground was shifting under them. At the peak, many of the people involved were literally working 24 hours a day highlighted by a phone call made to Vikram Pandit, CEO of Citibank at 3 am telling how a deal he made at midnight for Wachovia had instead been trumped by another and that that deal had already been signed and blessed by the government. How major decisions were being made on the run and how solid institutions became institutions on the brink in a matter of hours.

The book also explains how companies like Barclays and China Investment Corporation were working behind the scenes as well how Paulson, Geithener and others in the government were scrambling to keep things from collapsing. There is a lot of Monday Morning Quarterbacking going on and some of the things these people did may not have been the best, but they pulled it off and we should all be grateful.

But there some bad guys, namely the short sellers and as usual some in congress. The book makes clear that out of control short selling added fuel to the flames that were occurring and that when we were facing this emergency some members of Congress were focused on their own butt instead of doing what was needed.

There is a huge cast in this book and its is sometimes hard to keep the people and their roles straight, but make the effort. You will be rewarded.

The book details the events, the people and the conversations that roiled the banks in 2008. The book does not really discuss why the events happened. If you're looking to understand why these banks fell, this is not the book to read.

The book is very readable and even at 539 pages, a person can finish it quickly. Another plus is that unlike most NY Times reporters, the author keeps most of his opinions out of the story until the last 2 pages.

His opinions are:

The government allowing Lehman to go into bankruptcy was the catalyst that caused the floodgates to open. This is probably why he spends a lot of the book developing the Lehman story.

He's ambivalent about whether the government players could have prevented the collapse of the banks or even if they did the right things when they did act. But he's quite clear that more banking regulation was needed then and is needed now.

One can disagree with his opinions, but he does well to leave most of them till the end of the book.

A few criticisms:

As mentioned, he does not discuss why exactly these events happened. In the epilogue, he briefly mentions 4 events that percolated over 10 years that conspired to cause the perfect storm in 2008. But he could have spent a chapter (prologue) describing these events and how they conspired to cause the problem. Apparently he's not a banker or an academic, so maybe he didn't feel qualified to do this.

Second criticism: In a few places prior to his epilogue, he lets us know his (negative) opinion of some players. It's obvious his disdain for Chris Cox and Sheila Bair. But he's particularly vitriolic towards the Wall Street Journal editorial page. I thought that as a chronicler, the author should have omitted his opinions of these people/institutions. Except for these incidents, he does largely keeps his opinions out of the manuscript until the last few pages.

Overall, a quick read that details the players and the chronology of events. If all you need is to understand the crisis, then this book should suffice.

After reading two other well-publicized books on the real estate bubble and following market crash, I felt like I had been had. One book, primarily about Lehman, was shallow and written by an egotistical prima donna. The other was too technical and appeared to not have been edited well.

This book was written by a finanial author and is fair, thorough, and puts everything in perspective. It is well-written and flows for an easy read.

If you have any interest in financial history, this book belongs on your shelf along with other classics like When Genius Failed, Barbarians at the Gate, and the Smartest Guys in the Room. Ignore the poor ratings by those who were disappointed in the Kindle price. That is another issue.

The problem with this book is not just that the author makes virtually no effort to explain why the whole financial system would have collapsed in 2008 absent huge taxpayer bailouts, other than in a few sentences in an epilogue. The problem is that throughout the book he uncritically channels the explanations for the collapse provided by the titans of Wall Street. The CEOs blame the government, the profit-seeking hedge funds and the shorts, never themselves. They come up with ludicrous justifications for billions in salaries and bonuses that fund their lavish lifestyles. You can almost hear Sorkin's pain when he describes how much the net worth of the Lehman CEO, Dick Fuld, declined, and how he has to consider selling his wife's art collection. The fact that he had redeemed hundreds of millions worth of stock ($482 million according to Fortune magazine) as his company was disintegrating around him barely gets mentioned. The accounting tricks used to prop up these paragons both to take their toxic assets temporarily off the books and to underreport the real compensation to executives go unmentioned. After reading this you also wonder what it is that these people actually do to earn these billions. Sorkin uncritically says that this money is necessary to "retain the talent." But Bank of America decided to pay $38 billion for Merrill Lynch after doing due diligence for a total of two days. Was this actually a demonstration of "talent"? The only sense you get of these people is that they're all scrappy testosterone-filled climbers from disadvantaged backgrounds who still feel a deep need to prove themselves and who also want to belong to an all-male club. Government regulators also belong to the same club; any of these CEOs can get any government official they want on the phone within a few minutes. Virtually every quote from a CEO has the "f" word somewhere in it, and women are persona non grata except for wallflower wives, who are either crying at some decision by their husbands that turns out to be brilliant (p. 40, 171), or are waiting patiently at home to stroke their egos. The two women who have anything to do with this story, Erin Callan, the Lehman CFO, and Sheila Bair, the FDIC Chairwoman, are disparaged in the meanest possible terms. Callan was a "diversity hire" (p. 112) whom Sorkin further maligns by repeating unsubstantiated rumors that she slept her way to the top. (p. 120). She "knew precious little" about her subject matter and "had no background in accounting whatsoever." (p. 29). A tax lawyer, with no background in accounting? Sure. She's ridiculed for having a framed cover story from a Conde Nast magazine on her wall; so she's also vain. Bair is similarly ridiculed as a "showboat," a "grandstander," and, worst of all in this all-male club, "not a team player." Sorkin is a talented writer, but New York Times reporters should do better than serve as propaganda mouthpieces for the ruling class that has fooled so many of us and stolen so many of our resources.

I have read many books on last year's economic crisis, and this book if not the best is certainly one of them. It is a well-written description on literally a day to day basis of the events in NYC and DC that changed our economic landscape forever. The book allows us to know the thoughts of many of the major participants and details the reasons for the actions taken, and shows us how close we came to an economic collapse. I strongly recommend it. Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System---and Themselves

Andrew Sorkin presents a cogent (if myopic) insider's chronicle of how the worst financial crisis since the Great Depression unfolded--at least in its late stages. He takes you into the board rooms and executive suites of some of the worlds' best known financial institutions: Lehman Brothers, Bank of America, Barclays, Meryl Lynch, Morgan Stanley, JP Morgan Chase, and Citigroup, to name a few. _Too Big to Fail_ is a compelling narrative--highlighting the most powerful figures in finance--both public and private sector--painting portraits of unmitigated egotism, unbridled greed, and the Wall Street-Washington deal-making that shielded the financial institutions from the folly of their own ineptness.

In fairness to Sorkin, he didn't set out to analyze what happened as much as to report on the players and their responses, the interpersonal dynamics, etc., within the unfolding events. This, I'm sure, contributed to the myopic perspective of the book. Perhaps had he set a more historic agenda at the onset (e.g., what role deregulation since Reagan played in the creation of this recession) we might better understand the duplicity of the financial industry and policymakers--on both sides of the aisle--who extol the virtues of a free market but then rush to protect the failed but greedy institutions with tax dollars.

Sorkin elucidates the beind-the-scenes drama and, though he doesn't come right out and say so, he clearly has favorites (Geithner, Paulson, Benanke, McDade) and those he disliked (women: Callan and Bair; those who disagreed with Geithner and Paulson: Cox). Indeed, Callan, Bair, and Cox were presented as flat, one-dimensional caricatures, conveying interactions descriptions only through the eyes of their detractors.

I'm curious to know how the story would have read had it been told from the perspectives of, say the CEO of Wells Fargo, which assiduously avoided sub-prime lending but was roped into the deal-making by Paulson, or Charles Schwab, whose company holds over a trillion dollars in assets and, likewise, stayed clear of the more toxic investments that crippled so many others. How would an in-depth representation of the perspective of say, Sheila Bair, Chair of the FDIC, who was reluctant to infuse tax dollars into the system have informed the narrative? At least these perspectives would have enriched and rounded out the perspectives at the elite level. (It would be way too much to ask, I suppose, that some of the more populist members of Congress--on both sides of the aisle--be interviewed for such a project...)

That said, I did find the book to have been a compelling read. If you thought the average sub-prime mortgage holder was greedy for signing contracts on homes they simply could not afford, just take a peak at the avarice on display by our financial institutions, which compounded the poor judgment and greed of the sub-prime homeowners by a factor of a hundred thousand, at least, and the complicity of Paulson, Geithner, et al, in shielding them (with our money) from the consequences of their actions.

I was interested in knowing what goes on behind the scenes in these financial crisis times. I thought maybe it would be a little dry reading matter, but found it was as hard to put down as an adventure novel. Very indepth without any apparent bias in my opinion on the author's part.

"Too Big to Fail" by Andrew Ross Sorkin is a masterpiece of reporting. Based on more than 200 interviews with virtually all of the major and minor players involved in the financial crisis, the book is as exciting as any adventure fiction I've read. If it were made up, you might be tempted to say that it was too far-fetched to be believable. If Sorkin doesn't win the Pulitzer Prize for "Too Big to Fail," I'll be disappointed. The book traces the events leading up to and immediately following the fall of Lehman Brothers. It is a detailed behind-the-scenes minute-by-minute exposition of what all the players did, which includes such well-known names as Paulson, Bernanke, and Geithner, and such pillars of the U.S. financial structure as Citibank, Goldman Sachs, Morgan Stanley, AIG and others. I was impressed by how smart and dedicated the major and minor players were, and how adrift experienced people can be when faced with a unique situation which challenges their beliefs and prejudices. If anyone thinks that any of the Wall Street players are worth the money they are paying themselves, then this book will be a road map to reducing their salaries for, in the end, they behave and think pretty much like the rest of us. In my opinion, the person who comes out best in this book is Hank Paulson who, as Secretary of the Treasury, provided leadership, guts and the intellectual honesty to change his mind and abandon ideology that wasn't working. The Wall Street titans were, in many cases, simply pathetic. I recommend this book to anyone who is interested in reading a good book even if you're not interested in the subject matter. Just pretend that you're reading a John Grisham novel and you won't put the book down.

You will like this book if:

(1) You quickly grab the magazine People out of a stack that includes the WSJ and Economist.

(2) You like the way children's books have a purely linear plot trajectory without the bothersome nuance or multilayers of say an Iago character.

(3) You really think that despite the press reporting that the little time left in W's administration made it impossible for Paulson to accomplish much as Treasury Secretary (2006 to the end), Paulson took up the challenge of doing something big (see pg. 43 "Nothing could have played more effectively to his [Paulson's] immediate sense of buyer's remorse [on becoming Treasury Sec.]--and motivate him to overcome the challenge."). Really? Paulson decided "I'll show 'em" and set in motion the financial collapse? That isn't even what the author intended but that is what the page says.

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I actually really expected and wanted to like this book. I was shocked at how bad it was. It is obvious the author is more interested in political connections and market timing of the book than actual reporting (with Fuld as the primary source).

Maybe the mystery of complex derivatives clouds what's wrong with this book, so here is a simple thought experiment that explains it. Imagine you wanted to learn about the Exxon Valdez oil spill in Prince William Sound in 1989. You pick up a book written by a reporter for the New York Times who interviewed everyone involved in the spill. You have the following basic questions: Was Prince William Sound ecologically pristine or already spoiled prior to the spill? Was Prince William Sound considered a tricky run for tankers? What actions did the captain of the Valdez take immediately before it ran aground? Did Exxon prepare a risk assessment for this run? Did Exxon discuss double-hulled tankers specifically for this run to prevent oil spills? Did BP, Shell, or Chevron run tankers through this same run without incident? Is there a company that has always avoided spills?

Sticking with this thought experiment, about fifty pages into the book you realize the author has passed by these basic questions. Instead, the book merely interlaces into the post-spill chronology trivial facts such as: what the lighthouse officer who took the emergency call from the Valdez ate the night before the spill, what the captain of the Valdez claimed was the biggest marlin he caught off the coast of South America, or what the Exxon executive who was sent to Alaska to manage PR said he shot in 18 holes of golf at Torrey Pines the day before the spill (there is about 1 per page in "Too Big to Fail"). The book then spends its remaining pages on this linear post-spill chronology of Exxon officers meeting with government officials. These conversations focus on how best to clean up the spilled oil. An epilogue does gloss over, untied to any actual reporting, what might have contributed to the spill. You are left wondering why you bothered to read the book.

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With so much media glittering about, and much of it worth paying attention to, it stinks to get fooled by poor quality media. The lesson is that nonfiction books in print for only a few months are rarely harshly reviewed. A hopeful note is that these Amazon customer reviews of Dan Brown's latest fiction did seem to outpace any planted 5-star reviews, and a New York Times op-ed contributor wasn't afraid to hammer Brown on that book in the Book Review, but it is less likely to occur with nonfiction. If you are still reading these comments, I hope you save yourself from reading "Too Big to Fail" because it makes no attempt to analyze: What caused this financial crisis? What actions did these CEOs take before the crisis? How extraordinary were these responses to the crisis and how did they diverge from prior responses? Can future crises be avoided? What was different about JP Morgan, Chase, and Co.?

Seriously, how hard would it be for a financial reporter to sit down with the financial records of all the major banks and investment banks and put together a mortgage-backed derivatives exposure graph for each company that shows where JP diverged? The post-crisis stock values of JP (JPM) and Citi (C) suggest this information is available in the public domain. Thus, the only plausible explanation for why the book avoids these questions is the author's lack of financial acumen. In view of this problem, the People magazine style reveals itself to be not just expedient but obligatory.

The resulting storyline is simply, "Paulson said 'we are going to do...' and then the CEO responded '...'" without the context of: What caused the crisis?; How extraordinary was that response by Paulson in the context of prior crises?; Is Paulson's response likely to be successful 5 years from now?; Is another crisis likely? Without any effort to analyze these larger and more basic questions, the storyline is indistinguishable from a children's book.

The lack of reporting in "Too Big to Fail" mirrors the lack of real worth in the pure arbitrage of mortgages. I defy anyone to post something they read in this book that was new information that changed their view of the cause of this financial crisis. Assuming no one is able to cite anything new, defenders of the book are left to claim it as a behind the scenes account of the events. How useful is that information when the important question is why some financial institutions were deemed in late 2008 too big to fail? I don't think a behind the scenes storyline adds anything to the larger and more basic question of what exactly makes an institution too big to fail.

Maybe it is asking too much, but could a reporter with good sources and good analysis of empirical data show mathematically what line exactly in the sand Paulson and Bernanke committed our financial system to uphold as too big to fail? Then, using that mathematical model the even more interesting question becomes: would any Great Depression era financial institutions even have been deemed that big, ie, too big to fail, had Paulson and Bernanke applied that mathematical formula to the Great Depression? Restated, does the present top-heavy nature of our financial institutions (which might be even more pronounced than during the Great Depression) make the system indistinguishable from a state-run system and mean too big to fail is with us for good and antitrust laws should break up these institutions, or does the empirical analysis reveal something else? Those are the questions that I hoped a New York Times reporter would dig into, but the gulf between this book and those questions is: too big to describe.

Sorkin has done an admirable job of compiling a sort of play-by-play history of the recent financial crisis. He has interviewed all the key people and gives the reader a sense of how quickly events were taking place and how decision makers formulated policy as best they could in adverse circumstances.

However, the book is sorely lacking in any deep analytical insight and reads like a gossipy People Magazine version of the crisis...i.e., Dick Fuld telling his wife that "It's really over" as his eyes welled up with tears, or decriptions of tired investment bankers racing downtown to the Fed on only four hours of sleep. Relevant questions that are left unanswered might have been the following: What lead to the crisis? What does it mean to have a financial industry dominated by institutions that are "Too Big to Fail"? Should the financial industry be able to support the failure of a major institution without needing government intervention? Should the banks now be dismantled? Addressing these questions is clearly not the intention of Sorkin's book, but still, some analysis of the events would have made his book much more than a simple chronology of the daily movements of the key actors in the crisis.

Furthermore, even though the book is focused on the daily events, it is often confusing exactly what date in history to which Sorkin is referring and what the financial markets or a specific company's stock was trading on at that time. It makes me think that he is a bit too detached from the financial markets to have a good understanding of some the events that were taking place.

The book is also littered with both spelling and factual mistakes, which makes me think that Sorkin cranked out the book in not more than a thirty day stretch. Here is a sample of some obvious miskates that at least a copy editor should have caught: On page 70, "price" is spelled "pricve"; Page 310 reads "they need o be prepared"; and perhaps most embarrasing, page 85 reads "Alan Greenspan, who was to fiscal policy what Warren Buffett was to investing..." Greenspan, as Chairman of the Federal Reserve, was responsible for setting monetary policy, not fiscal policy, as the latter (tax policy and government spending) is determined by Congress. Also Buffett is still currently investing so it should probably be written as "is to investing."

In sum, its a rather disappointing book that, despite the catchy title, will probably add little value to one'e understanding of the crisis. However, if you happen to be on a beach and have just drank three cocktails, it might be just the book you're looking for.