There are all kinds of business books out there, hundreds, even thousands sold every year. Very few of them are written so well, that you are compelled to finish it when you start. "All the Devils Are Here" is a tale that needs to be told, and is told in such a way that you will find yourself going without eating to finish it.
I knew Bethany McLean's work previously from reading "The Smartest Guy in the Room". It's the same deal, great story, written in a compelling manner. In this book there are 22 chapters of narrative written in 358 pages. Here are just a handful of the colorful characters you will meet and learn considerably about.
* Stan O'Neal - CEO of Merrill Lynch
He's aloof, suspicious, completely envious of competitor Goldman Sachs, and personally is very insecure. He could not stand having people of superior intellect around him, and in a corporation that is precisely what you need.
* Franklin Raines - Head of Fannie Mae
You talk about screwing up, the American taxpayer may have to lend Fannie Mae a hundred billion dollars before it's over, and somehow Raines still got a severance package.
* Brian Clarkson - CEO of Moody's the rating service
Only in America could Clarkson have come up with the concept that you could take third tier bonds, and if you put enough of them together, they could be triple AAA rated. The concept would plow the country deep into the financial crisis.
* Hank Greenberg- The modern founder of AIG
In the end, Greenberg developed a company with so many layers of intertwining intrigue, that only he knew how all the pieces fit together. It was a house of cards.
* Angelo Mozilo - CEO of Countrywide, the loan people
He wanted homeownership for everyone, and in the process of actualizing the myth, helped to bring on the financial crisis which would also destroy his career, and independence of his company.
There are many more players and their stories. The above are just the key players, but you will also get to know Alan Greenspan, Jimmy Cayne (Bear Stearns), Alan Greenspan, Lloyd Blankfein (Goldman Sachs), and more. If you think you understand Wall Street, think again. Reading the newspapers won't help you. You need to hear it from a master storyteller, and that's what you get with McLean and Nocera. In page after page, they put it all together for you. They take the disparate parts, and weave a mosaic that allows you to finally understand how did we allow ourselves into this mess? Who did it? Could it have been avoided? Finally, are we out of the hole yet, or are we digging further in?
You will learn about how Stan O'Neal schemed, and plotted his way to the top of Merrill Lynch, forcing previous CEO David Komansky out of his job earlier than expected. O'Neal proceeds to gut the firm of its enormous talent base, and brings in a bunch of yes men, to assuage his ego. He fires the head of risk management, only to have to rehire him later on. O'Neal practically collapses when he's told that the firm owns tens of billions of dollars of unsalable bonds. O'Neal was ultimately fired. I had the pleasure of seeing him on a Jet Blue flight to Florida recently. Gone is the Gulfstream jet he used for a play toy. I must admit to taking pleasure by yelling, "Hey O'Neal, how do you like Jet Blue." I'm a taxpayer too.
You'll learn how Goldman Sachs went from putting the client first to a firm now better known for its proprietary trading desk, and private equity group. O'Neal may have envied Goldman, but Goldman knew how to manage risk. They would elevate their risk management group to the same level as other groups in the firm; giving them independence to sniff around and tell the CEO what they really thought was happening. Only Goldman managed to survive the financial crisis unscathed, while everyone else was writing off tens of billions of dollars.
The story of Moody's was especially interesting. Warren Buffett bought 15% of the company because of its impregnable market position, coupled with steady, reliable, and huge cash flow. In one year, Moody's went from 35% of the mortgage backed securities market to a 59% market share. How did they do it? They blew up their standards, shifted their analysts around in order to make them ask fewer questions, and started charging millions every time an investment bank wanted to do a 100 million dollar collateralized bond obligation.
Moody's believed and promised the unthinkable. You could take poor bonds, but by putting them together and bundling them, you could make them triple AAA rated. As a rule, institutional buyers do not look beyond the triple AAA rating. They simply rely on the integrity of the rating agency. Moody's thought the laws of economics had been repealed. What is amazing is that to this day, Moody's has never been punished for their actions.
If you want exciting, if you want compelling, then you must get your hands on this book. It will make you angry, even furious at how the regulators looked the other way. You will never trust Wall Street again and why should you? It becomes apparent that many people in financial services are paid four, five, six times what people make for the same function in other professions, and industries, and yet they required an $800 billion bailout from mom and pop America.
There have been upwards of 50 books written about the financial crisis. As of this date, "All The Devils Are here", is the best of them. It is the most interesting, and it is laid out in easy to read language with no axes to grind, no hidden agendas. It will give you clarity, as to the interplay between government, Wall Street, and the banks. I give this book five stars, and thank you for reading this review.
Richard C. Stoyeck
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The most authoritative book on the financial crisis
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Reviewed in Germany on November 25, 2013
