Author Archive

The Great Read-cession, Part V

House of CardsThe Great Read-cession is back! Today John S looks at two books that focus on banks that are no longer with us. Pour one out for Bear Stearns and Lehman Brothers, then read this…

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street

by William D. Cohan, 2010

 

William D. Cohan* is a banker-turned-writer who has by now written three histories of different Wall Street firms: His first book was about Lazard Freres, his former employer, and his latest is about Goldman Sachs. House of Cards, though, is the tale of Bear Stearns, the first investment bank that was taken down by the crisis.

*Duke alum!

Bears Stearns’s collapse occupies an odd place in the narrative of the 2008 crash, having occurred in March, six months before the fall of Lehman Brothers, the subsequent panic, and the passage of TARP. At that time, nobody quite knew the enormity of the problem facing Wall Street, and there was hope that Bear Stearns’s collapse would be the nadir of the problem. The firm was the smallest of the major Wall Street investment banks—if there was going to be a casualty, it would make sense for it to be Bear Stearns.

So how does a Wall Street bank go bankrupt? Well, the same way Mike Campbell did: Gradually, then suddenly. The seeds of Bear Stearns’s collapse go back several years—and possibly, Cohan implies, several decades—but the proximate cause was the sudden grip of panic that seized the firm in March of 2008.

Continue reading

The Great Read-cession, Part IV

On the BrinkWelcome to Part IV of our eleven-part breakdown of the books of the financial crisis. Having trouble keeping up? Then check out this page for all previous and future posts in the series.

On the Brink: Inside the Race to Stop the Collapse of the Global Financial System

by Henry Paulson 2010

 

The unifying element of the first four books was pessimism: Whether it was Ritholtz’s scorn for those in power, Morgenson’s search for someone to blame, Lewis’s tragic tale, or Sorkin’s narrative of disaster, all four books had decidedly bleak outlooks on the events. Since there is only so much despair one person can read about, I wanted to read the account of someone who would be sympathetic to the policy-makers and CEOs who everyone else blamed.

Henry Paulson was perfect. If the financial panic of 2008 has a face, it’s Paulson’s. As Treasury Secretary during the collapse, he was the one who told Congress of the dangers of Fannie and Freddie (in his infamous squirt gun analogy), who proposed TARP, and who ultimately dispensed the bailouts. And unlike the other figures prominently involved—Geithner, Bernanke—he faded from public view almost immediately after the disaster passed.

Reading Paulson’s book, though, it is hard to dislike him. His prose is straightforward and he comes across as an upstanding, diligent worker with integrity. He’s honest, but polite and gracious to a fault—despite presiding over what many would describe as a complete disaster, he has nothing but kind words for almost everyone involved.* He worked for Presidents Nixon and Bush—two of the least popular Presidents of the last 50 years, if not ever—but says nothing negative about either. He clashed with another prominent public figure, Jon Corzine, for the top spot at Goldman Sachs, but all he says about that is “frankly, the pairing was never right.” Continue reading

The Great Read-cession, Part III

Reckless Endangerment

We’re up to Part III of John’s breakdown of the books of the financial crisis. Click here for Part I, and here for Part II.

Reckless Endangerment: How Outsized Ambition, Greed, And Corruption Led to Economic Armageddon

by Gretchen Morgenson and Joshua Rosner, 2010

 

Reckless Endangerment is one of a specific subgenre of financial crisis literature, which might be called the “Blame X” genre. Human nature being what it is, there is a lot of demand for books that find someone or something to blame for the whole ordeal.

Reckless Endangerment’s targets are Fannie Mae and Freddie Mac, the government-sponsored entities (GSEs hereafter) designed to aid the housing market, and specifically Jim A. Johnson, the CEO who brought Fannie Mae to new heights (or depths, depending on your perspective). Morgenson and Rosner lay almost all the blame for the financial crisis on Johnson’s reckless efforts to expand Fannie’s market share: “A Pied Piper of the financial sector, Johnson led both the private and public sectors down a path that led directly to the eventual crisis of 2008.”

The GSEs are frequent targets of this kind of criticism, and for good reason: The bailouts of Fannie Mae and Freddie Mac created by far the biggest losses of all the government bailouts of 2008-09: The costs have already exceeded $180 billion and could reach $363 billion (conversely, Treasury claims to have actually profited on TARP*). And they were terribly run companies before that: In 2004, they were charged with massive accounting irregularities that led to the resignation of their CEO, and several executives were implicated in the “Friends of Angelo” bribery scandal.

*Though those claims should be taken with a grain of salt, as we’ll see later.

Morgenson’s book does a thorough job of portraying the extent and nature of corruption that was almost inherent to the GSEs. Particularly appalling is the incestuous relationship between the companies and the government. The entire concept of a “government-sponsored enterprise” sounds almost Orwellian: The institutions were created as government agencies* during the New Deal, but Lyndon Johnson partially privatized them, in what was essentially an accounting gimmick, when costs related to the Vietnam War made government expenditures look bad. Continue reading

The Great Read-cession, Part II

Too Big To FailIt’s Part II of John’s attempt to read every single book on the financial crisis of 2008. Check out Part I here if you missed yesterday’s introduction. Today we talk about the two most famous books the crisis produced.

Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save The Financial System—And Themselves*

by Andrew Ross Sorkin, 2009

 

*See? I warned you about those subtitles…

The first book I read was probably the most famous book on the subject of the financial disaster. Sorkin’s book was an award-winning best seller, and it was adapted into an HBO film. It also has the most iconic name.

It’s easy to understand why TBTF was such a hit: The book is essentially a thriller, depicting the days and months of greatest turmoil. It’s not so much about the causes of the crisis as it is about the disastrous results.

Sorkin embraces the thriller-quality of his narrative, and he does it very well. The book is excellent at setting scenes and introducing a myriad of characters. His scenes are short—rarely more than two pages long—and colorful, with lots of detail and dialogue. Although there are over 150 people introduced (there is a helpful eight-page Cast List in the front of the book), Sorkin does an excellent job of making them all seem unique—a difficult task, since almost all are rich, middle-aged white guys. He includes just enough backstory to provide context and make them seem like real people, without weighing down his narrative.

The narrative begins in March 2008, with the bailout of Bear Stearns. Sorkin doesn’t spend much time on the specifics of that deal—in which the Fed guaranteed $30 billion of assets in exchange for JP Morgan buying the firm for $2 a share*—but instead focuses on the ripple effect of the deal. There is some irony, of course, in this ripple effect: The main reason the Fed intervened in the Bear Stearns failure was to prevent the failure from infecting other firms. Instead, all the Fed did was replace one ripple effect with another. Continue reading

The Great Read-cession: Books of the Financial Crisis

It's been five years since Lehman's demise

Introduction

 

Sometime during 2011, essentially on a whim, I decided that I wanted to read every book written on the subject of the financial crisis of 2007-08.

What would motivate someone to undertake such a project? Eh, who knows why people do the things they do? As far as I can remember, I had two main motives: one general and one specific.

Generally, I’ve always had a vague desire to pick one subject and just read everything I could about it. Whenever I read a work of nonfiction, no matter how good or thorough it is, I have this feeling that I’m only getting some of the story. I’m only seeing reality as filtered through the author. The stories told are the ones the author found interesting; the opinions featured are the ones of this writer’s sources; the quotes are the ones he happened to write down. Even the most evenhanded and objective writer retains some biases, if only due to the natural limitations on research and reporting. When I read nonfiction, I always feel keenly aware of this. As a result, a book that’s supposed to inform me often ends up highlighting what I still don’t know.

This problem doesn’t really have a solution—nobody can be a firsthand witness to everything—but reading the same story multiple times is at least a better approximation of reality than reading it just once. After all, the police don’t stop the investigation after interviewing one witness. Of course, there’s a reason most people don’t read this way: It is, by design, very, very repetitive. You’d end up reading slightly different versions of the same story over and over again, intentionally making a leisure activity less fun.

Nevertheless, the cumulative nagging of years of nonfiction motivated me to at least try this method once. No matter the subject, I felt like the experiment would at least give me a better sense of the systemic biases of nonfiction.

Which brings me to the specific reason of why this subject. Continue reading

Real World/Road Rules Challenge: Rivals II, The Grand Finale

Winners!“I’m always looked at as, like, I don’t know… not that good at shit. I’m not good at challenges. I’m not good at elimination rounds. But I never wanted to let Emily down, so I did the best I could.” —Paula

 

“Third place is not my destiny!” —Emily

 

It may be anticlimactic, but it’s always nice when the team that deserves to win actually wins. And for both the guys and the girls, the winning pair for Rivals II was the team that performed the best throughout the Challenge.

First of all, Emily/Paula were obviously the best female team. They may not have dominated as much as I initially expected—early on I said they might go undefeated in challenges, which obviously didn’t pan out—but they were clearly the alphas on the girls’ side throughout. Even when they did lose, it was a surprise. Continue reading

Real World/Road Rules Challenge: Rivals II, Week 11 Power Rankings

Do they look like winners?“I really want to win this Challenge. I feel like I’m one of the best competitors to ever be on The Challenge, and at the same time I feel like the Dan Marino of The Challenge. One of the best quarterbacks ever, a Hall of Famer—doesn’t have a ring. I don’t want to be Dan Marino. I want to be Tom Brady.” —C.T. 

“I will be shot before I let Camila and Jemmye beat me to that yacht.” —Emily

 

People complain a lot about gimmickry in sports. Of course, what makes something a “gimmick” usually depends on your perspective. Baseball’s second wildcard certainly seems like a gimmick… until you’re a Yankees fan with no other hope of seeing the postseason.

Still, one gimmick I am decidedly against is eliminating players in the middle of a challenge. It seems to me that the whole point of devising these long, elaborate Final Challenges is so the teams have to be good at a lot of different things in order to win. That way, teams that fall behind after one event can make it up in the future. Conversely, teams that build big leads are always in danger of blowing it if they run into something they can’t do.

But eliminating a team after the first leg of a multistage challenge erases these possibilities. If the thing you’re weakest at happens to come first, then you are shit out of luck. This looked to be the case for Cooke/Cara Maria on Wednesday night, when Cara Maria, who had been violently dreading any swimming on the Final Challenge, had to swim her way to the first puzzle. And, indeed, Cooke/Cara Maria were the last team to start the puzzle, but luckily they were able to make up ground on the puzzle itself. Camila/Jemmye were not as lucky—their weakness was puzzles, and their inability to finish the puzzle on “Dream Island” got them eliminated  from the game for good. Continue reading

Real World/Road Rules Challenge: Rivals II, Week 10 Power Rankings

Happier times...“No matter what, people will not be friends after this.” —Paula

 

Diem: “I’m really confused.”

Wes: “That’s an emotional thing.”

Diem: “I’m an emotional person!”

 

I have been watching the Challenge for many, many years—not quite since the beginning, but close. And I’ve watched half a dozen Real World seasons as well. Still, I don’t think I’ve ever seen the entire cast turn to the cameraman, point, and yell, “Go!” the way they did in Wednesday’s episode of Rivals II, after Diem followed C.T. away from the pool.

The confrontation itself was a bit of a letdown—they both just stuck to their guns—but it shows how invested everyone involved in the show—cast, crew, and audience—is in C.T. and Diem. The conflict between the two former lovers was pretty small—C.T. didn’t vote the way Diem would have liked—but it became a kind of Rorschach test for how everyone perceives C.T. Continue reading

Top Ten Things To Be Excited About In The Fall TV Season

As I said last year, it now seems like the fall is the worst season for television. The new shows are mostly on networks, which means the good ones will likely be cancelled in a few weeks, and the best of cable—Breaking Bad, Louie, Wilfred, Pretty Little Liars, Mad Men—seems to air on a summer or spring schedule. Still, there are some great shows coming back this fall, and the sheer quantity of new shows means there’s bound to be something good. Here are the 10 most intriguing shows…

10) Marvel’s Agents of S.H.I.E.L.D. Premieres September 24 on ABC

I’ve pretty much abandoned network dramas at this point, but this one is from Joss/Jed Whedon, which bodes well. Plus, given the Avengers pedigree, it’s likely to last at least a full year.

Continue reading

Real World/Road Rules Challenge: Rivals II, Week 9 Power Rankings

Love story for the ages“She was about to tell me she loves me. Now she’s snoring.” —C.T.

 

“We ran circles around everyone that even attempted to do it… There is not a single person who’s not shaking in their boot.” —Wes

 

There’s a common fallacy in life that is always brilliantly illustrated on the Challenge—namely, the belief that if someone’s personal interests don’t align with your own, he is morally at fault. We saw this two weeks ago, when Frank took great umbrage with Jordan’s resistance to being voted in even though that’s what Frank wanted. It was as if Frank could not recognize that Jordan’s priorities might differ from his own.

On Wednesday, that same thing was on display, though this time it was two teams that were safe from the Jungle going at it. After Marlon/Jordan got voted in against Knight/Preston, thereby guaranteeing spots in the Final for C.T./Wes and Johnny/Frank, the two surviving teams went at it. Initially, it was all innocent trash talk, with Wes pointing out that Johnny nearly fainted after this week’s challenge, and therefore wasn’t much of a threat in the Final. Johnny responded by invoking Wes’ abysmal Final performance in the original Rivals season. Continue reading

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