Sunday, August 22, 2010

By Reviewed by David and Nancy Beckwith

"Too Big to Fail"

By Andrew Ross Sorkin

Viking, $32.95

We found "Too Big to Fail" too riveting to put down. It is a well written, informative book about the worst financial crisis in the U.S. since the Great Depression.

Too big to fail refers to the practice of governments deeming that certain institutions are of systematic importance and that letting them succumb to external or internal pressures would have drastic adverse ripple effects on the entire economy.

Speaking for ourselves, we both have advanced degrees in finance and spent virtually our entire careers as financial professionals in the banking and securities sectors of the financial services industry. We have witnessed many crises: Watergate and the aftermath; the business-choking, record-setting, double-digit interest rates of the late 1970s; the 1987 stock market crash; the savings and loan crisis of the early 1990s; Operation Desert Storm, the dot-com bubble and its results; the complete shut-down of the financial markets after the World Trade Center bombing on Sept. 11, 2001; and finally the 2008 financial crisis, which almost turned into a world economic tsunami.

"Too Big To Fail" is the harrowing account of the demise of financial institutions thought to be impregnable and the largest-scale government intervention in modern history at the expense of the American taxpayer. "In the end," writes Andrew Sorkin, "this drama is a human one, a tale about the fallibility of people who thought they themselves were too big to fail."

Some of the names at the center of the debacle were an impressive group of corporate American giants: Citibank, Lehman Brothers, Goldman Sachs, J.P. Morgan Chase, Morgan Stanley, Merrill Lynch, Wachovia, AIG and General Electric.

Andrew Sorkin writes this business thriller in the narrative nonfiction format, relating a true story in the format of a novel. Readers feel they're a fly on the wall in the board room and in the middle of the action. After interviewing more than 200 people and spending more than 500 hours with top government officials and Wall Street luminaries, Sorkin recreates intimate conversations and high-level discussions about one of the most tumultuous years in American history.

The story is alive with anecdotes, salty dialogue and page-turning cliffhangers. The reader finds out that CEOs are human too and often have a preference for the F word. Treasury Secretary Henry Paulson says "that makes me want to vomit" and he then does so while he is trying to deal with the crushing stress of the Bear Sterns crisis. Or Dick Fuld, the CEO of Lehman Brothers, crying with his wife as his world is falling apart.

There is even something like a car chase as CEOs gather at the Federal Reserve on a Friday night to try to save Lehman, only to discover that Morgan Stanley's CEO was stuck in New York traffic and is now speeding in his Audi on a bicycle path along the Hudson, trying desperately to get to the meeting. Other people attending were having their own issues. Jamie Dimon, chief executive of J.P. Morgan Chase, would miss a dinner party his wife was hosting for the parents of their daughter's boyfriend, whom he was to meet for the first time. When he finally arrived he could only tell his wife's alarmed guests that he'd been dealing with a situation they could read about in the paper the following day.

The book's strength is in the details about the lives of powerful people involved in the drama. Readers see the contrasting lives of the most powerful men in America. Henry Paulson lived in 1,200-square-foot apartment while Joe Gregory, Dick Fuld's number-two at Lehman, took a helicopter to work every day.

Some critics fault the book because Sorkin has not attempted to diagnose the reasons for the crisis and offer suggestions on what could be done to prevent its reoccurrence. We do not think it was his intent to write an economics textbook on how close the American financial system came to imploding. The mission of this volume was to tell what happened, not why it happened, and do so in a readable format.

How often can one say that a 600-page nonfiction business book is a page-turner?