Thursday, December 9, 2010

Lehman books and others

The “other” is Charles Gasparino's Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed the Global Financial System and the Lehman books are Vicky Ward's Devil's Casino and A Colossal Failure of Common Sense by Lawrence McDonald.

Unexpectedly, of the three, the Gasparino book was the better. Unexpectedly also, the argument of the sub-title that government mismanagement destroyed our lives was not pushed as hard as I thought it would be, i.e., I thought that Fannie and Freddie would be denigrated and blamed but they were not blamed as loudly as I had expected. There is a trend throughout the book that the government actions essentially sowed the seeds for the next bubble – that when regulation clamped down on sector of the market e.g. junk bonds and Mike Milken, Wall Street merely moved on the the dot-coms and when that sector went bust, they just moved on to MBS. I thought that this book was actually a pretty good overview of the entire crisis.

The Lehman books were a bust. Vicky Ward's was better written and only the first half covered the crisis, with the latter part of the book devoted to Lehman's rise after its spinoff from American Express. It largely follows the lives of Tom Tucker, Joe Gregory, Dick Fuld, Chris Pettit whom she tries to portray as the person who was most responsible for its rise and the demise of Lehman was a rejection of Pettit's values. Its mostly a tale of betrayal as Pettit's demise set off a power struggle resulting in the rise of Dick Fuld and Joe Gregory who begin to live large. This was a nicely paced book and easy to read. MacDonald's book was a disappointment since I had expected an “insider” view. Unfortunately, MacDonald was one of maybe 5000 vice presidents in Lehman and was fired before the full Lehman crisis. His claim that Paulson hated Fuld's guts was not substantiated by other accounts (e.g. Ward, Wessel or Paulson). He also depicted the exit of Joe Gregory and Erin Callan as being a coup led by Bart MacDade which is not substantiated either. So much for insider views.

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