Customer Reviews

The Wall Street Journal Guide to the End of Wall Street as We Know It: What You Need to Know About the Greatest Financial Crisis of Our Time--and How to Survive It

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This is the first book I have read on my new Kindle. The author, Dave Kansas, is a former editor of the Wall Street Journal. The book is a concise and unbiased examination of what exactly has happened to the economy as well as a brief discussion on what an individual should currently do to protect their investments.

The book starts by giving a brief history of risk - specifically examining how changes in investment strategies created new risk markets and thus new avenues for profit, leading to the bundling and selling of high risk mortgages that largely kicked off the economic decline. From there proceeds a discussion of derivatives, private-equity, and leverage.

Chapter three deals with the 'canaries in the coal mine' that should have been taken note of before the collapse of Bear Stearns. Chapter four deals with the cascading impacts such as the takeover of Fannie and Freddie and the death of Lehman Brothers.

Chapter five is about where we go from here. Chapter six shifts to the individual and which types of investments are protected. Chapter seven is about debt and Chapter eight provides advice for the individual, based on their age.

Scattered throughout the book are mini-biographies of the names and faces involved, such as Timothy Geithner, Warren Buffett, and Alan Greenspan. At the end of each chapter is a summary in the form of an FAQ.

I found the book very interesting and well written. What to many would sound like a rather dry subject is given in a fast paced narrative.

I stopped cold when I saw "The Wall Street Journal Guide to the End of Wall Street as We Know It" on a bookstand in the Pittsburgh Airport in January 2009. Browsing through it, not only could I scarcely believe how quickly it was written and brought to market, I could barely believe how clearly it outlined our current economic environment.

Another thing became clear - that Dave Kansas, from his perch as a journalist with The Wall Street Journal, TheStreet.com, and FiLife is one of the few writers who could have written this book.

Kansas captures the historical background to the cataclysmic month of October 2008 using the recent examples of the Asian financial crisis of 1997, the Russian crisis of 1998, the U.S. internet and technology bubble of 2000-2001. More pointedly, he delves into the implosion of hedge fund Long Term Capital Management (LTCM), the shortsighted policies of Fannie Mae and Freddie Mac, and the creation of, and dependence on, credit-default swaps (CDSs), collateralized debt obligations (CDOs), and collateralized mortgage obligations (CMOs).

Kansas's conclusion: October 2008 was predictable. In fact, many of the firms swirling at the epicenter of the current crisis knew they had serious trouble brewing, but couldn't, or wouldn't, take action to avert their fate.

In early 2009, nothing can hide how much our world and our financial markets have changed. Venerable financial firms have either ceased to exist or been swallowed up by stronger, more prudent, players. We are all left to deal with the aftermath.

We've got to deal with the aftermath as we deal with our individual and collective behavior. I say that because most of us have scant knowledge of the role that complex financial products played in this mess and, to a large degree, that's okay. What's not okay is our intimate, yet often unrecognized or unacknowledged, knowledge of our human frailties. Human frailties that Kansas intimates underlie the real problem.

As human beings, we do chase returns. We do act on our greed and overconfidence. We are often guilty of employing hope rather than sound strategy. And, if human beings approach the financial market in this way, what does that portend for a financial system run by human beings?

I learned a great deal from "The Wall Street Journal Guide to the End of Wall Street as We Know It." I found it as important as a chronicle of the human frailties that led to our current crisis as it is an explanation of the nuts and bolts of how it happened. It cut through the hype and explained very complex terms in a straight forward and easily understood manner. But, it went even further by aiming to arm me with usable information.

The bottom line is it's a true feat to produce a book this good so quickly. My only question is: Will we, individually and collectively, learn from it just as quickly?

This book by Dave Kansas (formerly an editor at the Wall Street Journal, among other things) covers the financial turmoil and recession that erupted in September 2008 and continued into the next Administration.

Kansas does a good job of explaining why a speculative bubble developed. The basic ingredients were easy money, a widespread conviction that housing prices could only go up, and a willingness of banks, investors, and home buyers alike to borrow beyond their means in hopes of windfall gains. He declines to assign the blame to any particular group, e.g., Fannie Mae and Freddie Mac, concluding that although these quasi-governmental entities "played their part, so did the Wall Street banks that concocted investment instruments that would turn toxic."

The sequence of events in 2008 is well covered, with background information on some of the key players and layman's language explanations of the complex financial instruments that were involved, e.g., credit default swaps. Nothing really new, but this is a concise and useful summary.

Of course, the story continued beyond the cutoff point chosen for this book (apparently January 2009), and readers may be put off that major developments - such as the $787 billion stimulus bill and the prepackaged bankruptcy filings of Chrysler and General Motors - are not mentioned. Such is the inevitable consequence of getting out a book about "the greatest financial crisis of our time" (per back cover copy) so quickly.

The author's predictions for the future shape of Wall Street are rather sketchy, e.g., he foresees "a handful of behemoths and a number of minnows [specializing] in key areas such as advising on mergers or helping companies go public," with the "firms in between" struggling to survive. And there will be new government regulations aimed at preventing such a crisis from happening again, hopefully remaking the system rather than simply adding "more regulations and regulators." (As of this writing, the add-on approach seems to be winning out.)

Rather better done, I thought, was the advice provided for individuals. Give up the notion that real estate is a great investment; buy a house to live in if you can afford a 20% down payment and otherwise rent. Get rid of that high-priced credit card debt, it is perilous to your financial health, and get in the habit of "paying yourself first" (saving). Do not give up on stock investments, which will pay off better than anything else in the long run, but diversify your holdings and avoid securities that have been bid up beyond reason. Make your own investment decisions, but pay a reputable financial adviser to provide a check on your reasoning. Consider a reverse mortgage if it fits your circumstances, but be aware of the pitfalls (high cost, possibility that declining real estate values will leave a debt for your estate).

What about the possibility that the current recession will not end within the next year or so, but become a long, drawn-out affair? The author advises readers not to "expect long soup lines and tattered men selling apples from a bucket. The references to the Great Depression are hyperbolic and the product more of reduced memories than of reality." I could argue otherwise, but let's hope he is right.

If you're still not sure what happened, how we got here, what to expect, and where to turn, it's doubtful you'll find a saner, more concise and user-friendly book than this. The author makes brief references to the growing importance of the stock market in the '80s and '90s, bringing with it more and more derivatives, securitizing, and schemes for extracting money from debt. But primarily the focus is exclusively on this millennium, from the collapse of Worldcom to the failure of financial institutions, one by one--Lehman, AIG, Bear Stearns, etc.

Practically all of the terms that have been in the news during the last half of 2008 are rehearsed and explained along with profiles of some of the chief players in this drama, from Alan Greenspan to Robert Shiller to Tim Geithner, Ben Bernanke, and even Warren Buffett.

What may surprise some readers is that the author makes no references to political parties or to U.S. Presidents. Nor, for that matter, is space allotted to "Dow talk," the stock market averages that seem to be the constant obsession of most financial news commentators and networks. Nor is there any melodramatic handwringing over some socialist/communist path the more outrageous talking heads have accused the political bad guys of leading us down. It's clear that the author, David Kansas, does not confuse the fortunes of Wall Street with the economy or link Presidential politics with a world-wide phenomenon that's far beyond the provocations or solutions of a political party let alone a single individual.

The author manages to play an even hand, basically sticking to the "objective facts" yet injecting enough of a personal voice (in the form of the 2nd-person pronoun and question-answer sections) to appeal to a broad cross-section of readers. He offers nothing close to a panacea or rosy outlook and is almost as careful to avoid pressing any panic buttons, though some readers who have tuned in only recently to controversies surrounding the Obama administration's handling of the crisis may be surprised to learn how dire things had become by September 2008.

He does offer minimal practical advice and guidance to readers of different ages, means, and situations for the new economic realities that, as I write this, are seeming less severe thanks to a 7-day market rally. If, or when, that bubble bursts and we take out yet another low, the book will no doubt seem all the more timely and relevant.

This is certainly not a book for everyone--some will find its coverage scant and limited--too little information about overly familiar material. In fact, most readers should be able to finish the entire volume in several hours (there is no index). The book's title and length, moreover, are undeniably opportunistic (the contents and style are far more commonsensical and matter-of-fact than the "apocalyptic title" would suggest). But if economics was not your strong suit in school or you were simply inattentive to the meltdown of the past year until recently, this small and focused volume should prove a useful primer.

Since most of you do not watch CNBC everyday and read the financial press daily as if a religion, this is a good primer on what went wrong. Most of the book is history and very well explained. The actions to take now are far too general. One final brief chapter and it is too simplistic to prepare a real plan.

Some points require more information like the FDIC insurance limit of $250,000 for example is for a limited time period over the prior $100,000 coverage. (Reader Beware here !) I would have included some website links for readers to do some additional research for planning "what next" since the author leads you in the right direction.

Given the "Wall Street Journal Branding", I expected more on the personal finance "next steps". The author does, however instill the need to return to the old days of "thrift and savings" throughout your financial life cycle and does address your "needs vs. wants" mentality. This should be the mantra of financial literacy and hopefully the book instills "due dilligence" as a prerequisite for all of your money matters.

Apart from the hyped to the moon title and the usual tendency of 90% of mainstream money books to be either insanely,rabid dog frothingly pessimistic (Howard Ruff, anyone?) or screamingly, irrationally optimistic of the You Can Make a Billion $ in Your Spare Time with No Risk!!!! (Jim Cramer, anyone?) this is really just a litany of the failures of '08: Bear Sterns, Lehman Bros, AIG, Fannie & Freddie, WA Mu, and so on that anyone with even a passing interest in popular culture, let alone business, will be all too familiar with from even a casual reading of USA Today or Vanity Fair.

Which brings up the central question I kept asking as I read this scant 200 page book padded with tons of blank space, illustrations, and assorted filler: "who is this aimed at? " or rather "Who should pay $15.99 for some really generic, standard information that is easily available elsewhere, often for free?"

Kansas is a good synopsizer and the section called "The Week that changed American Capitalism" is precise and somewhat insightful. If you've been Rip Van Winkling it up for the past year, this will catch you up painlessly, as you sip ice tea on the porch. Yet if you have any real interest in the serious issues Kansas flies right over, you will be much better served elsewhere.

The political push for increased home ownership from both parties led Fannie Mae and Freddie Mac, aided by Greenspan's low rates at the Fed, to surge ahead with loans at lower and lower rates. This, in turn, created increasing home prices where lenders cared less and less about the creditworthiness of borrowers - just hang on long enough until the price went up - then refinance or sell.

Wall Street bankers, under pressure to increase earnings, developed a bundling approach to minimize the risks of investing in home mortgages, and passed them on to those who didn't know what they were buying. Any scintilla of perceived risk was supposedly eliminated by credit default swaps (CDS) developed by J.P. Morgan in the late 1990s - supposed guarantees against failure. Unfortunately, those selling CDS were not regulated, and the requisite financial backing was not provided. Nonetheless, the confidence these CDS provided, along with sophisticated computer risk models, easily convinced banks and others to leverage to the hilt and load up on these new products.

Regulators did not take action - they were led by Bush II appointees who simply believed that regulations stood in the way of efficient markets. This was "confirmed" by no less an authority than Alan Greenspan. Credit ratings agencies did no better, oblivious to realizing that "whatever cannot continue forever, won't." (Herb Stein, former Fed Chairman)

Then two hedge funds managed by Bear Stearns collapsed, investors panicked and wanted their money back, the CDS were quickly exposed as worthless paper, and banks stopped lending as a result of needing to write down their investments and prepare for any possible runs. The computer risk models had once again forgotten about correlated risk - it was Long Term Capital deja vu all over again. The economy basically stopped.

Clearly, our financial and regulatory systems failed us. That does not stop some from continuing to live in the past - CNBC continues to announce their NYC location as "the financial capital of the world." Not likely, given the American financial assets now held in Asia (Treasuries, corporate bonds, U.S. stocks), and the anger of many at the economic collapse that has ensued in this collapse.

What do we learn from this? Once again, it pays to be too big to fail; better yet, overly complex AND too big to fail. Thus, the $700 billion taxpayer-funded bank bailout and $780 billion stimulus bills, so far. Thrift is back in - consumers have no other choice as their favorite ATM (home, sweet home) is probably "underwater," and their second-favorite ATM (401ks) have fallen in value by close to half. Worse yet, the fear of layoffs is mushrooming with no end in sight. And the Asians continue to invade with their millions of cargo containers.

What to do now? Invest in real estate, stocks, under one's mattress? Hopefully readers are not near or past retirement age - those are the most seriously affected. One would hope that "business as usual" will not prevail - but how is this different than the LTC and S&L crises, except much, much bigger?

This is a great summation of the recent problems concerning the mortgage crisis and credit crunch. There are many other books such as Bad Money and Chain of Blame that go in to further detail. The power of this book is that is simply lays out a summary of the issues, generally reading like it was completely taken from newspaper articles. While you might want more "meat in the subject", for those looking for a quick review, this is an excellent book.

I have read many books on the topic and have a basic idea of what really happened, though we may never fully understand why. I find this book to be concise, yet very comprehensive. David kansas explains the cause of the financial crisis in simple terms and give you a breakdown of how Wall Street and the housing market, as well as other financial institutions are tightly intertwined; thus resulting in a domino effect when things go awry. Many of us hear about the Economic Crisis on the news or just in everyday conversation, and unless you're directly affiliated or familiar with the industry, you do not fully understand the cause and effects. This book is a good place to start.

Read some newspaper stories. Watch a financial show on TV. Surf the Web. You'll find more detail on why the financial world came to its knees elsewhere. Really.

The book drones on and on about everything you already know, or can very easily find. The author ends up repeating himself on many occasions, including two identical sentences in the same paragraph. I found this book a very dry read with no new ideas or insight.