Too Big to Fail

BOOK REVIEW: Too Big to Fail: Inside the Battle to Save Wall Street, by Andrew Ross Sorkin ($12.52 on Amazon Kindle; read a free sample chapter here.).

This is one of many books that have been published over the last three years detailing the financial crises that overwhelmed the American banks in 2008. At six hundred and sixteen pages you may feel that Too Big to Fail looks too thick to read, but persevere and you will find it interesting in spite of its many faults. It has been made into a good movie which is being run on Sky this month starring James Woods as Richard Fuld and John Hurt as an uncanny look-alike of Richard Paulson.

It is a fly-on the wall account of the events surrounding the demise of Lehman brothers, however if you are looking for purple prose such as Matt Taibibi’s, who famously described Goldman Sachs as ”blood sucking vampire squids wrapped around the face of humanity shoving their blood funnels into anything that smells of money” you will disappointed. It is the story of how the bankers used accounting tricks to hide their true positions, not only from the world, but also from themselves, which made the inevitable debacle more spectacular and dangerous.

This doorstopper was shortlisted for the BBC Samuel Johnston prize in 2010 but after a second read (with no skipping) it is a good book spoilt by having been rushed to print too quickly.

There is a useful cast of characters and the company they kept at the beginning of the book, however sometimes the author refers to them by their full names and at other times by their first name or their last name only at random, which is very irritating.

Sometimes the dates of events are not made clear – the author can refer an event in 2005 than in the next paragraph write about a meeting in February. Which February? It helps to print out a timeline from the internet to fully understand the story. For a few pages Erin Callan was referred to as a "he" when in fact she was a woman.

This is a complex story, and it was made more difficult to read due to these constant mistakes. Most of the book concentrates on the fall of Lehman Brothers perhaps because once Lehman’s was bankrupted the principals there had nothing to lose by being frank.

As each character is introduced to us we are given a short family and career history. Most of the players come from a middle class background, often from mid-West, some of them with less than stellar education or qualifications.

This is an exhaustive report of the day to day behind the scenes drama with minimum of editorising.

One of the things that likable about this book is that small but telling details are often used to make a point. Fuld was obsessed with the short sellers who were pulling Lehman’s apart, and blamed them instead of himself for the demise of the bank.

You may also be interested in a wider view point which can be found in “Wall Street and the Financial Crises: Anatomy of a Financial Collapse”, a 650 page report released by the Senate Sub-committee on Investigations, chaired by Democrat Carl Levin and Republican Tom Coburn. This is absolutely free courtesy of the US government and for my money is the more informative read. Furthermore it is freely available for downloading on the Internet.

It contains an unusually scathing bi-partisan portrait of the failure of the banking system in America with an excellent explanation of the complexities of the banking world.

It is especially critical of how Goldman Sachs rorted the financial system to suit itself. The firm avoided large subprime write downs and achieved a net profit due to significant losses on non-prime securitised loans being offset by gains in on short mortgage positions.

Finally the report offers new developments in preventing bank abuses. Unfortunately the recommendations contained in this report, given the political stalemate in Washington will never see the light of day.

Price $US12.52 on a kindle near you.