Too Big To Fail is a welcome antidote to the many rather dry books analysing the economic and regulatory failure of the financial markets. It is a genuinely good read.
Most of the books chronicling the meltdown of the financial markets in 2007 and 2008 are rather academic analyses of the economic theory and practices that led to the Credit Crunch. As a result they are not the easiest reads and are only really of interest to economists and those involved with financial services. Too Big to Fail on the other hand is a real life thriller.
Too Big to Fail is sub-titled Inside the Battle of to Save Wall Street which sets the scene perfectly. The main story is of the rise and, especially, the fall of Lehman Brothers which had been seen as a success story. Dick Fuld had built Lehman into a major investment bank and as a result Fuld played major roles with industry bodies.
After some scene setting around the creation of Lehman the coverage focuses on the period from Spring 2008, when Bear Sterns failed, through to the Autumn. Over those few months it tells the gripping story of the internal struggles within the company and other financial services organisations on Wall Street. The contagion spreads out across the world but the story concentrates on the impact in the USA.
The characters are bigger than in most novels and Andrew Sorkin makes them real to the reader as he explores their personalities and motivations through their behaviour and response to their organisation’s battle for survival.
In parallel Too Big to Fail tracks the story of AIG and others such as Merill Lynch or Goldman Sachs. The books tracks the machinations as other institutions worked to prevent their own failure. Like all good novels these alternative story lines interweave and interact with the main plot. Even knowing the outcome the behaviour of the players is a fascinating tale of hubris, self-delusion and denial of the reality of their situation.
The heads of many investment banks often placed unrealistically high valuations on their businesses in the face of the collapse of the market. Many blamed the hedge funds and “short-sellers” rather than their own behaviour and as a result were slow to take effective remedial action.
t has been argueId that the short term nature of bonuses drove risk taking by bankers. It has been suggested that if the rewards were locked in for a longer period then traders and managers would be more circumspect about taking short term risk. However it is not borne out by the experience of many of the principals of the failed banks. They often had the most substantial part of their wealth tied up in their institution’s shares. Dick Fuld of Lehman was worth over a billion dollars and lost 95% of it when Lehman went into bankruptcy and his holding effectively disappeared.
Although Too Big to Fail reads like a thriller its extensive cast of characters is more like a Russian novel, War and Peace springs to mind. Thoughtfully a cast list is provided at the beginning to help the reader keep track of the players. However the main characters are established well and made three-dimensional by the excellent writing.
Too Big to Fail romps along covering complex ideas in an accessible, even exciting, way. Most readers attracted to this book should not have a problem as it is light on economic theory but is strong on personality and behaviour.
Money and politics inevitably leads to intrigue and this is well explored in a fascinating story. Too Big to Fail should appeal to readers who have an interest in finance and the financial markets; it is a much more readable account than the more theoretical economical analyses. It should also be enjoyed by lovers of the political novel even though this is reality. It is just as exciting but all the more worrying because of it.
Andrew Ross Sorkin is a well respected and award-winning financial journalist for the New York Times. Too Big to Fail is based on more than five hundred hours of interviews with the main players during the difficult period covered by the book.
Too Big to Fail, Inside the Battle to Save Wall Street (2009, ISBN: 978-1-846-14238-3) by Andrew Ross Sorkin published by Allen Lane in paperback at £14.99.
First seen on Suite101