“The Hack’s Tale”

By Satyajit Das, a risk consultant and author of Traders, Guns & Money: Knowns and Unknowns in the Dazzling World of Derivatives

In Fed We Trust: Ben Bernanke’s War on the Great Panic by David Wessel

Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves by Andrew Ross Sorkin

The Sellout: How Three Decades of Wall Street Greed and Government Mismanagement Destroyed The Global Financial System by Charles Gasparino

The economists have had their say. The financiers have had theirs. Prominent Cassandras have been caught in print ‘predicting’ various past crises. Even traders have written extensively about lap dancing and excessive drinking that, apparently, lay at the heart of the global financial crisis. It is now the turn of the hacks – journalists!

In these books, three well connected and savvy journalists – David Wessel (Wall Street Journal), Andrew Ross Sorkin (New York Times) and Charles Gasparino (CNBC) – set out a ‘blow-by-blow’, ‘wasp-on-the-wall’ accounts of the crisis.

In Fed We Trust and Too Big to Fail are heavily focused on the period around the collapse of Lehman Brothers and the subsequent financial market meltdown. In Fed We Trust emphasizes the role of the Fed and Bernanke in the narrative, trying to explain how the authorities tried to cope with the developing problems. In contrast (though the difference is slight as both books cover similar territory), Too Big to Fail has at its center the figure of Henry “Hank” Paulson. The Sellout is somewhat differentiated by its more expansive view of the history of the events leading up to the crisis seen through the lens of people and personalities involved in the business.

In Fed We Trust and Too Big to Fail are largely faithful chronological accounts of events. The differences lie in some of the anecdotes and the depth of the historical background that is portrayed. If you were Rip van Winkle and missed the last 18 months, the books would be invaluable in avoiding the need to watch reruns of CNBC or Bloomberg TV to catch up on the sequence of events. The Sellout is more nuanced and floats (sometimes barges) back and forth across time.

Eminently readable and entertaining, the books are long on anecdote and light on analysis. This perhaps reflects the mass audience targeted.

The books are all unashamedly America centric – the rest of the world does not exist other than as backdrop to the narration. Perhaps that reflects events and a certain world view. When U.K. based Barclays Bank, backed by their government, wisely backed out of a last minute bid for Lehmans, Hank Paulson, the Treasury Secretary, muttered that the British had “grin-fucked us.”

The emphasis is on a “rippin’ yarn”. Banks failing, people lying, cheating and desperate to survive, large sums at stake, leaders faced with major decisions – the stuff of tall tales. The events are extraordinary enough to provide the drama.

The level of detail provided is sometimes puzzling. The attempt to provide “colour” is sometimes unproductive and often obscure.We learn that Bernanke played a prank on President Bush one day by coordinating the whole economic staff, along with even Dick Cheney to wear tan socks (clearly an inside if unfunny joke). Donald Kohn, Fed Vice-Chairman, lived in his son’s basement, rode his bike to work parking it in the Fed garage reserved for its governors’ cars and likes to run up and down the stairs of the Fed building.

The books deal in a simplistic manichean financial world. The “evil” is the avarice, arrogance, and sheer stupidity that created a dominant set of financial institutions that ultimately profoundly weakened the economy and financial security of millions of middle-class Americans. The “good” is the saviors – Paulson, Bernanke and the core cast of “Musketeers” (Don Kohn, Tim Geithner and Kevin Warsh) –who conceive and implement the “whatever it takes” strategy to prevent looming calamity.

The simplistic divide is hard to sustain as the authors have mixed views on all the participants the drama. A fact frequently glossed over is the saviors seem to have been able to locate the buried bodies because they had some part in putting them there in the first place. Nobody really emerges with his or her reputation quite intact.

A more problematic aspect of the works is the method used. As journalists with extensive contacts among the key players, the books rely on interviews and hearsay. While this gives authenticity to the story, at times, it is apparent that the sources have cleverly manipulated the authors to gain a particular view of events. To an extent, the need to maintain access to these contacts means that it would be inhumanly difficult to be totally honest in any assessment. This means that certain characters are treated kindly and others are not.

Paulson, Bernanke and Geithner are painted favorably and treated with a little too much care and courtesy. The issue of the bailout of AIG that benefited a number of banks, including Goldman Sachs, is not explored as incisively as it might have been. Perhaps, predictably, Richard Fuld (Lehman Brothers) and Jimmy Cayne (Bear Stearns) come off badly. Stan O’Neal and John Thain (Merrill Lynch) are painted as villains. The SEC’s Christopher Cox is not portrayed favorably. The most telling portrait is from Mr. Gasparino – Tommy Maheras, CitiGroup’s head of fixed income, is “a riverboat gambler” recklessly betting the bank’s balance sheet.

All three authors are also self-consciously embedded within the narrative showcasing sometimes self-serving recollections. The desire to reconstruct scenes from sources as the authors were not attendees pays homage to a Victorian melodramatic tradition.

In Fed We Trust, Too Big to Fail and The Sellout feel rushed, a concession to publishing pressures and deadlines and could have done with tighter editing. For the most part, the books provide an interesting overview of the events of 2008. They are not exhaustive nor are they deeply insightful. In fairness, they don’t purport to be. Each book, in their different ways, provides useful histories of the events that will ultimately allow economic historians to probe the issues better.

Other hack’s tales are sure to follow – after all many ambitious journalists followed and recorded the drama. They are soon to be joined by memoirs of the principal players. Hank Paulson’s sizable volume of recollections and undoubtedly self-justification is due for publications shortly. One suspects that the janitor’s and pizza delivery boy’s tale of the crisis are not that far away.

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  1. bp

    Is anyone aware of books that tell well the story from the other side of the Atlantic? Anything good on RBS, Lloyds/HBOS, Northern Rock, the German/Irish SIV experience, Dexia, Fortis, Iceland?

    Many of these were as consequential as the US experience.

    Also, I’d recommend readers look at the UBS Shareholder Report on Write-downs for their experience at the early stages of the crisis.

  2. llllxlxllllxlxllll

    If you work in corporate PR, you know you have two audiences – a congressional committe (plead the 5th, say a lot of nothing) or the business press (fluff stories, glib quotes and anecdotes). Where in this model are we supposed to get real information about what these people believe, and what it is they think they are entitled to?

  3. middyfeek

    I’ve read the first two books mentioned. TBTF is way too long (536pp) – too much minutiae. IFWT is too dry.

    I’d say that none of the major players come off looking good, but easily the worst is Jimmy Cayne. What a jackass. Please don’t even bother telling me he’s a rich jackass. It’s purely through accident of assignment.

  4. middyfeek

    Sorry, I made a mistake. Most of the info about Jimmy Cayne is in the book about Bear Stearns by William Cohen.

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