The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System (Hardcover)

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Editorial Reviews

Review

"Born in the Bronx to a construction worker and a housewife, Gasparino has risen from his working-class roots to become one of the most influential business reporters at work today." (PR Week )

"Gasparino describes, in page-turning detail, a Wall Street world of ruthless financial titans.. No collection of courtroom documents will ever tell the story.as well as Mr. Gasparino does." (Wall Street Journal, on King of the Club )

"An especially aggressive reporter." (Vanity Fair )

"A tough outsider willing to go to battle with anyone--colleague or contact-in pursuit of the story." (Financial Times )

"Gasparino is credited with breaking some of the more titillating tales of Wall Street misconduct." (New York Post )

"Gasparino has consistently broken news on some of the biggest financial scandals of recent years, including the fall of Martha Stewart, Henry Blodget, and Jack Grubman. As anyone who reads the business pages knows, Charlie is one of the best reporters in the field." (Mark Whitaker, former editor, Newsweek )

Product Description

The definitive account of Wall Street's stunning collapse

From critically acclaimed investigative journalist and CNBC personality Charles Gasparino comes a sweeping examination of the most recent volatile, anxiety-ridden era in our nation's socioeconomic history. The Sellout traces the implosion of the financial services business back to its roots in the late 1970s when Wall Street embraced a new business model predicated on taking enormous risks. It shows how a backwater business involving the trading of risky bonds packed with mortgages showered countless billions in profits on the financial industry but sowed the seeds of its ultimate demise. Gasparino walks readers through Wall Street's three-decades' love affair with risk, revealing a trail of culpability—from the government bureaucrats who crafted housing policies that encouraged homeownership, to the Wall Street firms that underwrote and invested in risky debt, to the mortgage sellers who handed out loans to people without the financial wherewithal to pay them back, to the homeowners who became convinced they could afford mansions on blue-collar wages. The ongoing tumult in financial markets and the global economy began when some of our most esteemed financial institutions, our government, and even average citizens abdicated their collective responsibilities, eventually selling out investors and selling off the American Dream itself.

In the spirit of classics such as Barbarians at the Gate and Liar's Poker, this page-turning narrative captures how avarice, arrogance, and sheer stupidity eroded Wall Street's dominance and profoundly weakened the financial security of millions of middle-class Americans. Eye-opening and engrossing, The Sellout provides the most thorough investigation to date of this latest gilded era.

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Product Details

• Hardcover: 576 pages
• Publisher: HarperBusiness (November 3, 2009)
• Language: English
• ISBN-10: 0061697168
• ISBN-13: 978-0061697166
• Product Dimensions: 9 x 6.3 x 1.5 inches
• Shipping Weight: 1.6 pounds (View shipping rates and policies)
• Average Customer Review: 3.7 out of 5 stars  See all reviews (14 customer reviews)
• Amazon.com Sales Rank: #43 in Books (See Bestsellers in Books)

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Customer Reviews

Most Helpful Customer Reviews

40 of 54 people found the following review helpful:

5.0 out of 5 stars The Unvarnished Story of the Financial Meltdown, November 3, 2009

By	JBeary (LA, Calif) - See all my reviews

I enjoy listening to Charlie Gasparino more than most of the talking heads on television business news. He's hard core. He's from a working class, family and it shows in his speech and in his reporting. Before appearing on CNBC, he worked for the Wall Street Journal, which gives him a better take on business than most of the people anchoring on CNBC.

In The Sellout, Gasparino dissects what went wrong with the mortgage market and caused the financial meltdown of 2009, and he doesn't put any lace on it.

If you read the book, you'll find out why Lehman was allowed to go under with a $500 billion dollar balance sheet, but the Feds wouldn't allow Merrill Lynch to do the same. At the time it didn't appear to make any sense.

Citibank and other big banks were on the brutal edge of insolvency. With $1 trillion in customer deposits what a mess it would have been if Citi had failed. And Merrill was carrying $1 trillion in liabilities on its balance sheet, twice that of Lehman, and it had $2 trillion dollars in customer accounts, which was twice as much as Citibank. No wonder there was panic at the Fed!

Scrambling as fast as they could go Bernanke and Paulson managed to stop the run on the banks and calm the country down. Goldman Sachs and Morgan Stanley had been converted from investment banks to commercial banks so they were allowed to borrow money from the Fed discount window at practically zero interest rates. Merrill Lynch had been shoved into Bank of America's hands by then so it looked like it might be a quiet Christmas.

Then on December 15th Ken Lewis called. He was stunned by Merrill's problems. "I need help," he told Bernanke. It wasn't the subprime loans on Merrill's books that were the problem. It was the $20 billion in bond losses caused by the downgrading during the crisis of monocline bond ratings below their original triple A rating. The value of the bonds had dropped on the downgrades, and Bank of America had to adjust the value of the bonds on their combined balance sheet, or sell them a equally huge loss. Bank of America didn't have the capital to take the write downs to cover the losses on the Merrill's bonds, much less its own losses on the bonds it held and the subprime mortgages it owned. Bank of America had just finished closing on buying Countrywide Financial and taking on all of their mortgage problems as well.

So here the nation is with a bank too big to fail? Why? What would have happened if the Fed had said no to Ken Lewis and let Bank of America, Citibank, Bear Stearns and others become insolvent simultaneously?

Personally, I like Gasparino's style of writing. I think it makes the book, the characters and the story seem real. It's not just a dry recounting of events.

I also liked the fact that he looked at the Community Reinvestment Act's contribution to the mess and who was responsible for that.

Find out why Bear Stearns, one of the most conservative investment banks on Wall Street, got caught up in this mud along with everyone else. Did the Secretary of Housing and Urban Development have anything to do with the fall of Bear Stearns?

The majority of Americans blame Wall Street for the financial crisis because that's the spin the politicians put on it to deflect the heat from them. Greed as a political finger pointer is almost as popular as "tax the rich"! But Wall Street was only packaging the products they were given from Fannie and Freddie. They leveraged themselves to buy more of the mortgage packages because the rate spread between the mortgage packages and the cost of borrowing was wide. It was an instant profit.

The investment banks were packaging mortgages together in such a way that the rating agencies were giving the packages A ratings. The packages themselves looked low risk. The investment bankers relied too heavily on the rating agencies and took on too much leverage. Both of those things were their fault, but if Freddie and Fannie hadn't kept the supply of subprime mortgages high by buying all the home loans they could get from mortgage brokers, there would have been far less product for Wall Street to sell, no need for leverage and better quality mortgages in the packages.

Who kept Fannie and Freddie buying up huge amounts of subprime mortgages when the word subprime means well below average credit rating for the borrower? Ten years earlier only a fraction of those buyers would have qualified for a loan to begin with. Why were they suddenly qualified now when the price of houses had grown faster than personal incomes?

Yes, I'm recommending the book. I liked it. The prologue pages available to view are not representative of the book, in my opinion. I rarely read book prologues anyway because they're usually irrelevant and not representative of the book.

Anyone who wants to know what went wrong, and who was really responsible for the financial crisis of 08 without all the finger pointing, political biases, and cover their butt rhetoric should read The Sellout.

4 of 5 people found the following review helpful:

5.0 out of 5 stars Excellent insight into the reasons for the crisis, November 6, 2009

By	S. McGee (New York, NY) - See all my reviews (TOP 500 REVIEWER)    (REAL NAME)

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Rated 4.5 stars; rounded up.

It's almost impossible to understand what happened on Wall Street in 2007 and 2008 without going back in time to the 1970s, the era in which investment banking changed forever. And that's what Gasparino does in this book, making it one of the most valuable books about the financial crisis published so far that the general reader is likely to find. Its nature is likely to come as a surprise to anyone who is familiar with the author only from his television appearances; while it has all the gossipy insights into Wall Street that Gasparino has always delivered (including Jimmy Cayne, the former CEO of Bear Stearns, offering him what Cayne described as a joint in an elevator one day...), it thankfully goes well beyond that. The scandalous tales about daily life on the Street are there to entertain and amuse us, sure, (along with a reasonable degree of self-promotion) but the author combines that with solid analysis and insight into the role played by the evolution of structured finance and the failures of risk management.

Most significantly, Gasparino pays attention to history, specifically to the way that a handful of bond market honchos transformed the mortgage lending market from a local business into a Wall Street affair. He weaves together the strands of the narrative deftly, showing how politics in Washington and greed on Wall Street combined to turbo-charge the level of risk-taking and then a series of risk-management failures. Andrew Ross Sorkin's book,[...] is more elegantly written and works as a great chronicle of the months that lay between the collapse of Bear Stearns and the near-apocalypse of September 2008, six months later, but a lot of the historical context needed to understand why those events unfolded as they did is missing. In contrast, Gasparino tries to accomplish something more ambitious, explaining how risk moved from becoming a way to boost profits on Wall Street to being the heart of Wall Street's business. What happened to Wall Street wasn't just about subprime lending or leverage -- it's about why the creation of mortgage-backed securities and leverage became the heart of what Wall Street is all about.

So far, the only books I've seen to have shed light on this issue aren't easily read by a general reader without a knowledge of finance or a high tolerance for jargon. [...] What Gasparino does is to present some of the same concepts in a gossipy, chatty book that should appeal to those on Main Street who are striving to understand just what happened and how it could happen.

Gasparino's thesis is that government policy encouraged that risk-taking to reach extreme levels -- in the great debate over whether Washington or Wall Street is more to blame with the mess, he comes down on the side of blaming Wall Street. (I'm not sure I agree, but his argument is thoughtful, logical and well-supported by the facts that he musters.) He correctly identifies the 1998 collapse of Long-Term Capital Management as a turning point in the process; after that point, it became politically impossible to let a large financial institution fail (and the CEOs of the large investment banks came to realize that.) After seeing just how urgently regulators pursued a bailout style solution to that conundrum, followed by the efforts to prevent Bear Stearns bankruptcy in early 2008, why would Dick Fuld take seriously the suggestion that he take urgent steps to bolster his balance sheet? Long before the critical events of September 2008, which culminated in a bailout of Fannie Mae, Freddie Mac and AIG (not to mention the TARP program that has left the US taxpayer owning stakes in B of A and Citigroup), `moral hazard' was alive and well on Wall Street. In Gasparino's view, misbegotten government policies designed to make home ownership possible for all Americans (even those not in a position to afford it) should shoulder most of the blame. But the bankers aren't let off the hook, either. Their errors of judgment and oversights are placed in the spotlight and held up to scorn.

It helps that Gasparino has been covering Wall Street and all its doings for the better part of two decades, starting on the ground floor (the guys doing the bond deals) and working his way up to writing about Wall Street CEOs like Cayne, Fuld and John Mack. Sure, he's self-promotional, but he also has access to a network on Wall Street that is both broad and deep. And in this case, he's pulled off a book that is as much analytical and anecdotal. That combination could make it stand as one of the best books about the crisis, despite the rather glib conclusions about what needs to happen next. Gasparino is good at tackling what happened, and identifying villains across the landscape, but the reason this gets 4.5 stars instead of 5 (and came close to being rounded down instead of up) was that the forward-looking analysis fell rather flat. Gasparino comes up with some rather predictable recommendations -- ditch the SEC, for instance -- but doesn't have the insight of, say, a Niall Ferguson when it comes to imagining a future shape for what he acknowledges is a deeply-flawed financial system.

Recommended for anyone looking for insight into what we have just been through and why we have had to go through it. Gasparino, always a tenacious scoop-hound, has gone beyond his traditional strengths as a reporter and produced a book that is far better-written and more thoughtful/analytical than his two previous offerings. If you're looking for other reading material on the crisis, Andrew Ross Sorkin's book will take you deeper into the chronology of the critical months (including who ate what, when and where, and the jogging paths of key players in the crisis), but I found the historical context was more perfunctory and the book emphasized the day-to-day drama at the expense of the reasons for the debacle. There are several more detailed books available about both Bear Stearns and Lehman Brothers; [...]

Full disclosure: Gasparino is a former colleague, although we haven't worked at the same organization in about eight years and we're not in touch regularly. I usually don't review books by people I know; I'm making an exception for this one because I think it's both a lively read and one that will help those who aren't on Wall Street get a handle on what happened, and because it provides the kind of historical context that has been largely lacking.

10 of 14 people found the following review helpful:

5.0 out of 5 stars Brave voice on a vital topic, November 4, 2009

By	A. Maven (Chicago, IL) - See all my reviews

Thank goodness there is someone willing to thoroughly investigate and clearly articulate these issues that are so vital to the future of our economy. Don't listen to the haters who want to keep someone like Garparino from peering behind the curtain and letting the American public know what's really going on. "Blood on the Streets" was an amazing expose and "The Sellout" is more of the same-- just what we need.