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Too Big To Fail - Book Review



September 29, 2010 – Comments (1)

I recently killed time on a cross-country plane ride by reading Andrew Ross Sorkin's Too Big To Fail.  Sorkin covers the financial crisis and bailouts of late 2008 and 2009 with an emphasis on presenting the story behind the scenes.

I found it fascinating - that needs to be qualified with the fact that I'm a financial junkie.

The book covers the Bear, Stearns sale to JP Morgan, the failure of Lehman Bros., bailout of AIG, near failure and sale of Merril Lynch, and establishing TARP.  Events leading up to Lehman's failure and the unsuccessful efforts to save the company  get the lion's share of coverage.  Dick Fuld, Lehman's CEO, is presented as someone desperately trying to save or sell the company, but unwilling or unable to come to grips with the value of the company's assets.  If Sorkin got the story correct, and I have no reason to believe he didn't, a lot of effort went in to trying to save Lehman - no one just stepped aside and let it go under.  The key difference between Bear and Lehman is there was a willing buyer for Bear.

Former Treasury Sec. Paulson comes across quite well.  He's presented as truly concerned about what would happen had the banking system been allowed to fail.  People will debate for a long time about what was done right and what was done wrong, but Paulson comes across as someone who did what he thought was best for the country.

The book presents much more involvement between the Fed, Treasury and private companies than I would have thought and a lot of involvement in trying to put together some of the acquisitions.

The book also has a bunch of obligatory pictures, mostly of execs and gov't officials.  A couple of the more interesting pics - a photo of the $9 billion check from Mitsubishi UFJ for its investment in Morgan Stanley, the letter to Hank Paulson giving him a waiver so he could talk to Goldman Sachs, and a vanity license plate a Morgan Stanley Vice Chairman got after the crisis - 2BG2FAIL.

It's a long read, but if you followed and/or are interested in the near financial collapse and the bailout policies, I think you'll find it fascinating.  If you're not very interested in the crisis and bailouts, you'll probably find the book a long and boring read.

Sorkin makes a very interesting observation on executive compensation.  An area with a lot of push for reform is aligning executive bonus structures with long term company performance.  One company in the middle of the crisis with that type structure - Lehman Bros.

Fool on!


PS - A big WOO HOO for no spam on the blog headlines page!


1 Comments – Post Your Own

#1) On October 01, 2010 at 3:38 PM, ikkyu2 (98.48) wrote:

Dick Fuld is the guy who told Congress he will go to his grave wondering why they didn't bail Lehman out.

That was a puzzling statement, to me, at the time.  I understand that you don't become CEO of a financial firm by being outer-directed, swayed by the winds blowing in your environment; but instead by having a clear, inner-directed, narrow-minded vision of what needs to be done to succeed, and how to implement that.

But Fuld seemed to me to have blinders on, even after the fact.  I often wonder what really happened - if it was just a Goldman - Lehman power struggle, winner take all.

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