UPDATE: Here is my 45 minute discussion about Too Big To Fail with author Andrew Ross Sorkin
New York Times merger and acquisitions reporter Andrew Ross Sorkin has written the insiders account of what was going on in board rooms and the highest levels of government during the worst of the Wall Street meltdown.
He was supposed to be my guest tonight on WRKO’s Pundit Review Radio but we are bumped for playoff baseball because of the rainout last night. I hope to have him on next weekend because I very much enjoyed the book. Here’s my review.
The access Sorkin has is truly impressive, as is the level of detail in the book. Just how connected Sorkin is became evident at the book’s release party, which included Wall Street’s A-List CEOs and dealmakers. Business Insider’s John Carney wrote,
The party was thrown last night at the Monkey Bar in midtown Manhattan, hosted by Vanity Fair editor Graydon Carter. It was overflowing with Wall Street’s biggest movers and shakers. More than one person remarked that it reminded them of Blackstone chief Steve Schwarzman’s over-the-top birthday party in early 2007. It sure seemed like it is okay for Wall Street to party again.
I couldn’t help but think of a line at the very end of the book, on the final page in fact. Talking about Wall Street a year later, Sorkin observed,
Still missing in the current system is a genuine sense of humility.
Given how connected he is, nobody would know better than him.
The book is written in short bursts of detail about a specific aspect of the crisis, a few pages on Lehman folllowed by a few about Paulson, Geithner and Bernanke, Goldman Sachs, JP Morgan, etc. Each change requires the reader to refocus, think about the big picture and interconnectedness of the problem itself. I’ve read reviews where they found it distracting, I found it just the opposite.
Given his beat at the NY Times, I expected Sorkin to have a gold-plated Wall Street rolodex. What surprised me, and was truly impressive, was the level of detail he had about the frantic meetings that were happening at the highest levels of government. The reader gets a real sense of the problems facing Paulson, Geithner and Bernanke. Given how fast things were happening, and how things ultimately turned out, it is hard for me to be too critical of them. No question, mistakes were made, but I came away feeling that this trio were true public servants doing everything they possibly could to prevent catastrophy.
The Wall Street crowd is a different story entirely. Everyone cites greed as the driving factor behind the meltdown. I got the sense reading the book that the real emotion driving this train was jealousy. Jealously of Goldman Sachs profit machine. Bear, Lehman, Morgan and Merrill all adopted riskier and riskier positions trying to play catch up. They leveraged their balance sheets 30-1. When Sorkin writes about Merrill making $2.6 B in profit “trading its own book” in 2002, making risky investments with the firms money rather than client money, the implication was clear. Short term gains would lead to long term pain.
Not many Wall Street players come away looking very good. However, Sorkin has such detail on the collapse of Lehman Brothers that even Dick Fuld becomes a somewhat sympathetic figure. The one man who deserves calling out for his behavior under pressure was John Mack of Morgan Stanley. With the future of his firm very much in doubt, literally days left perhaps, he received a call from NY Fed president Geithner and Fed Reserve chairman Ben Bernanke. The governments message was blunt, “Market’s can’t open Monday without a resolution of Morgan Stanley.” They were basically ordering Mack to sell the firm to JP Morgan immediately. Mack’s reply was impressive. I made a notation in the margin, “stud”,
“Let me ask you a question: Do you think this is good public policy? There are thirty-five thousand jobs that have been lost in this city between AIG, Lehman, Bear Sterns, and just layoffs. And you’re telling me that the right thing to do is to take forty-five thousand to fifty-thousand people, put them in play, and to have twenty thousand jobs disappear? I don’t see how that’s good public policy.”
For a moment there was silence on the phone. “It’s about soundness,” Geithner said impassively.
Mack closed by saying, “Well, look. I have the utmost respect for the three of you and what you’re doing. You are patriots, and no one in our country can thank you enough for that. But I won’t do it. I just won’t do it. I won’t do it to the forty-five thousand people who work here.”
With that, he hung up the phone.
By contrast, there is John Thain. Moments after the CEOs of the Big 9 firms were told they would be accepting TARP money whether they wanted to or not, Thain raised his hand with a question about how this would impact executive compensation.
The book is loaded with anecdotes and behind the scenes detail. One of best was a classic example of Harry Reid being a partisan jerk. Upon hearing Paulson’s dire request for immediate approval, as in days, for $700 billion dollars, Reid spoke up and said,
“It takes me forty-eight hours to get Republicans to agree to flush the toilets around here.” “Harry,” Mitch McConnell (R: Kentucky), who was deeply frightened by Paulson and Bernanke’s presentation, interjected, ” I think we need to do this, we should try to do this, and we can do this.”
Glad there were some grown-ups in the room representing Congress.
Too Big To Fail really gives the reader a sense of the players, their personalities and the rational behind their decsion making. Sorkin does a great job of describing the stress and tension that these firms, these people, were under.
One final note that demonstrates Sorkin knows how to play hardball himself, were the repeated digs at CNBC blowhard Charlie Gasperino, who also happens to have an insiders account on the way to book stores. I very much enjoyed those digs.