The Inside Story of How Wall Street and Washington Fought to Save the Financial System–and Themselves
Are you afraid of failure? – Well, you shouldn’t be if you have all the rightful tools.
This is a book for experts, a real step-by-step guide, and analyses of how Paulson, Geithner, Dimon, and Fuld managed to navigate the collapse of 2008.
Who Should Read “Too Big to Fail”? And Why?
This book comes as a blessing to those eager to discover what brought Wall Street to its knees in 2008.
If you think highly of yourself, perhaps “Too Big to Fail” will assist you in your way to become an all-around leader. Wall Street and the worldly economy rely so much on shares, transfer of shares, equity shares, and allocation of capital.
These things had always been a subject to numerous arguments, unlike other straightforward matters. our book summary has a task to awaken that entrepreneurial spirit in every individual, and eventually produce “Winners”.
About Andrew Ross Sorkin
Andrew Ross Sorkin was born on February 19th, 1977 in New York City.
He earned his bachelor degree from Cornell University. Andrew is a journalist, author, and a financial analyst, who currently works for The New York Times as an acquisitions reporter and columnist.
It’s also important to mention that he is the founder of DealBook.
“Too Big to Fail Summary”
Despite the Wall Street precautions, the U.S. economy experienced once again a financial “predicament”. Although this wasn’t the first time, September 2008 will remain carved deep into Wall Street history.
Unlike other types of crisis, this one emerged from nowhere. Wall Street had no other choice than to try and confront the calamitous collapse, in order to protect its shareholders.
First things first, let’s reveal what got the better of Wall Street.
2007 was great for investors, and shareholders, if we take into consideration $53 billion “facts” – earned in the previous 12 months. The compensation was motivation enough to proceed with the same strategy. Lloyd C. Blankfein, who was a Goldman Sachs CEO made a breath-taking $68 million only for himself.
Soon after the excitement, the inflated real estate market took a quick turn in the other direction leading to a full collapse. Generally speaking, Wall Street began to go back and forth without stopping.
Even though the debt-to-capital ratio reached a point of being 32 to 1, the marked couldn’t stand the fluctuations. According to experienced stockbrokers, this ratio “guarantees” profits even in boom times, but that was not the case here.
JPMorgan Chase stunned the people with his phrase – said on March 17, 2008 – I would rescue Bear Stearns, even in a fire-sale deal” A quote well-remembered.
Companies were on the brink of failure, all struggling to attract investors, that will ultimately improve their current situation. Quickly it became evident that trading partners and other potential investors cherished a cautious approach, sometimes referred as leery.
The stock market plunged instantly, and all of a sudden, everything changed. Investors were skittish, afraid of losing their capital, so they observed the “Stock-Swing” uninterested in conducting any financial activities of uncalculated risk. This shortage of transactions led to a 48% drop in shares value, in just an hour of trading.
One thing led to another, and “Too Big to Fail” was written, to indicate that nothing is unchangeable. Even great corporations experienced failures and rose from the ashes.
A perfect example is a collapse known as the “Great Depression” in the 30s. During the 2000s books about finances continued to pile up, you face a choice, to pick your favorite and proceed with your business endeavor.
Two types of books contradict due to the differences existing in the point of view – the priority. The first category belongs to – what went wrong and how to avoid anything like that in years to come.
Second, includes all those classics which focus on details concerning Wall Street, and Washington. These books cover a wide range of topics, all carrying a dose of uncertainty which is common when it comes to stocks.
You probably have your guesses, but “Too Big to Fail” belongs to the second category due to aspects discussed in each section.
New York Times reporter and author of this financial guidebook, Andrew Ross Sorkin, emphasizes the significance of high-level financial players in the stock market. Despite the earlier signs of inconsistency, this book provides a resourceful, unusually detailed account of the collapse and everything leading to it in 2008.
Andrew Ross accomplishes two outstanding feats: He draws information from reliable sources, while using some widely known facts, to present that type of information.
Even though his influence needs no further discussion, we would gladly give a clue about what makes this classic different than other books covering the same topic.
Key Lessons from “Too Big to Fail”
1. The uncertainty of markets
2.The excitement with a smell of catastrophe
3.The crisis escalated to the point of “Worldly Disaster”
The uncertainty of markets
A strange thing was happening only a year before the disaster: the markets, unlike any other year, had announced their astonishing profits driven by mortgage innovations and other acquisitions.
Meanwhile, the companies were preparing themselves for another fruitful year.
The excitement with a smell of catastrophe
Without delay, all people were emboldened by the situation in 2007 and quickly tried to increase their shares.
The purchasing of stocks led to the development of new stock prices due to profits expected in years to come, but someone miscalculated the whole process.
All the industries shared the hope for even better results in the next couple of months: stay tuned to find out what destroyed this optimistic forecast.
The crisis escalated to the point of “Worldly Disaster”
In the meantime, Lehman Brothers, (an investment bank as well) was on the verge of catastrophe as well.
All of these examples only indicate the devastating power of 2008 crisis that struck not just the Americans but spread throughout the world.
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“Too Big to Fail” Quotes
Our Critical Review
In the end, we also are thrilled and warmly recommend “Too Big to Fail” to all decision-makers, students, investors and policymakers and other businesspeople who are keen to learn more about the Wall Street’s meltdown.
The cover illustration to this doorstopper account of the credit crisis is a picture of a dinosaur, suggesting that within we will learn about deadly but doomed beasts, whose evolutionary deficiencies will consign them to extinction. It's not a bad visual metaphor for investment bankers, except that they are still here.
Andrew Ross Sorkin's blow-by-blow account of the unfolding of events in the US, when financial titans up to and including Goldman Sachs were days, or even hours, away from running out of liquidity, gives a handy dramatis personae of those inhabiting Wall Street's Jurassic Park, in the manner of a compendious Russian novel. A reader uninitiated in the detail of the crunch will need it: there are seemingly endless descriptions of the men (and one or two women) involved. Take the following: "Jamie Dimon's black Lexus pulled away from the curb of his Park Avenue apartment to head down to the Fed at just before 8am. Dimon, who sat on the back seat returning emails on his BlackBerry, had just gotten off a conference call with his management team… telling them to prepare for the bankruptcies of Lehman Brothers, Merrill Lynch, AIG, Morgan Stanley and even Goldman Sachs. He knew he might have been overstating the case, but figured they needed to be prepared. He was The Man Who Knew Too Much."
This sort of thing can become a little wearing, as can the description of virtually any man in his mid-40s or 50s as "remarkably youthful", as if the likes of the then 47-year-old president of the federal reserve, Tim Geithner, should have been trundling around Wall Street with the aid of a Zimmer frame – but I suppose one should cut some slack for a 32-year-old wunderkind author.
Sorkin's portrayal of Erin Callan, former Lehman's finance director, is typical: she is a "striking blonde" with "Sex and the City" stilettoes, suspected to be romantically involved with the man who hired her, a suggestion made without a shred of substantiation. The bigger problem, though, is the claim of authorial omniscience, admittedly based on more than 500 hours of interviews with 200 people.
The book, which has been billed as the defining account of the credit crunch, has caused a media storm in Manhattan: Sorkin's colleagues on the New York Times are reported to be angry at his failure to credit the newspaper's scoops. US business reporter Charlie Gasparino of CNBC is upset at a quote attributed to Lloyd Blankfein, the head of Goldman Sachs, calling him a "rumour monger", as is the bank. Blankfein has been heard to grumble since about Sorkin's self-professed mind-reading abilities. There has been sniping, too, that the author is too cosy with the people he writes about, both in the book and the NYT: the likes of Jamie Dimon and John Mack (CEO of Morgan Stanley, nickname: "The Knife") turned up at his book party, hosted by Vanity Fair magazine.
Sorkin's account deals with the frenzied few months starting on 17 March 2008, when Lehman Brothers chief Dick Fuld was summoned back by then treasury secretary Hank Paulson from a trip to India because of the collapse of Bear Stearns. It ends in mid-October of that year, with Paulson finally accepting that he had to "cross the Rubicon" with a bailout for the banks.
Sorkin does offer some genuinely telling detail. Fuld, the self-centred, foul-mouthed, but deeply loyal man who took Lehman to its destruction, is summed up in one anecdote: while hiking with the asthmatic son of a colleague, the boy panicked and was being guided to safety by his father and Fuld. The party met another walker who looked at the 10-year-old boy and commented: "My, aren't we wheezy today." Fuld turned on him and shouted: "Eat shit and die! Eat shit and die!"
From a UK perspective, there are fascinating insights into less-than-flattering US views of us. John Varley, the intelligent and decent boss of Barclays, is dismissed by Paulson as a "waffler" and a "weak man". Paulson declared the British had "grin-fucked us" after the chancellor and the Financial Services Authority declined to allow Barclays to take over Lehmans on the grounds it was too risky – meaning we did the dirty on the Americans while smiling to their faces (I had to look it up). Bob Diamond, the American investment banking supremo at Barclays, is equally disparaging about his adopted home, where he can claim his bonuses with non-dom tax privilege: he BlackBerried his friend Bob Steel to moan about "little England".
A clue to the difficulty politicians had in dealing with the crisis is in the very small gene pool shared by the two worlds. Dubya's brother Jeb worked as an adviser to Lehmans' private-equity arm and his second cousin George H Walker IV was on the executive committee. Hank Paulson's brother Richard also worked for the firm; as a former employee of Goldman Sachs, Paulson was tied up in knots over his subsequent dealings with his former employer. And what is not in the book is as striking as what is: in these pages, we do not meet so much as a single sub-prime borrower facing foreclosure.
So is Too Big to Fail the best book about the crisis? For my money, Fool's Goldby Gillian Tett is a more sophisticated read; from a UK perspective, Alex Brummer's The Crunch is more engaging; and Graham Turner's No Way to Run an Economy is more provocative. But it's unfair to expect any one book to serve such a huge, multilayered subject and Sorkin has provided an entertaining addition to the crunch-lit genre. Its final message is a worrying one. Unlike the dinosaurs on the cover, the Wall Street raptors are far from extinct, despite their greed and folly; those who remain are doing better than ever. "Perhaps most disturbing of all, ego is still very much a central part of the Wall Street machine," Sorkin says, noting that the survivors have been left with a genuine sense of invulnerability. Jurassic Park may be less populous, but how long before the sequel?
Ruth Sunderland is business editor of the Observer