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Showing reviews 1-5 of 64
 Excellent Review of the Players: From AIG to Wells Fargo May 18, 2009
Mike Morgan (New York, NY)
127 out of 133 found this review helpful
The book starts with a fly-on-the-wall description of big, offsite meeting in Boca Raton for J.P. Morgan employees. There they made plans to ensure that J.P. Morgan led the industry in credit derivatives. This story of the bravado of young party animals becomes the backdrop for how we got into this mess. These recently minted and overconfident traders and analysts risk takers, lead a headlong charge into a poorly understood market innovation. After that, Tett describes in detail the array of models, players and events that lead to the financial crisis and weaves them all together to explain the events like no other author yet has done.
Although the description of events are detailed, Tett leaves out explanations of how basic psychology and particular modeling errors contributed to the problem - such as the researched described in Hubbard's The Failure of Risk Management: Why It's Broken and How to Fix It (although Hubbard is talking about risk management in a broader sense than financial risks alone, I still recommend both books for this topic). But Tett is also more pragmatic and specific than Taleb's The Black Swan: The Impact of the Highly Improbable and makes more logically supported conclusions than Posner's A Failure of Capitalism: The Crisis of '08 and the Descent into Depression.
Tett seems to cover just about every aspect of the recent crisis that an author can cover without getting into specific mathematical modeling errors (Hubbard argues this is a critical contributor but it would be hard to elaborate without alienating much of the audience). She covers AIG, Bear Sterns, Fannie Mae, the credit rating agencies and the Basel II accords. She mentions Gaussian copula model, Goldman Sachs and the actions of Alan Greenspan. The details of Structured Investment Vehicles (SIV) and Value at Risk are included along with recent events like the Troubled Asset Relief Program (TARP).
I do not believe there is another single book that has this breadth of coverage combined with a logical picture of how they formed an avalanche of connected events. As of now, this is the single most important book on the topic, period.
Well written book that is a must-read for anyone who works in finance, or is mad at the financial wreck we are in May 23, 2009
S. Yang
66 out of 70 found this review helpful
Having read this book over 3 days (interrupted only by work, playtime with my two toddlers, and sleep), I highly recommend it to anyone who cares about our financial system (be it that you work in finance, or hate financiers that brought us the ruins - just bear in mind they were not the only ones to blame, throw in the regulators, lenders, and borrowers who enjoyed the party, and politicians who took credit for the housing boom). The book is well-written, focused, and surprisingly a page-turner that you don't want to put down once you start reading it.
Having fought the battles in the trenches over the past two years during the ongoing financial crisis, I have a deep appreciation for what Gillian Tett has accomplished in this book. It provides a comprehensive view of one corner of the financial markets - the one that caused so much of the wreckage over the past two years. While it will be a daunting task for any single writer to document the crisis we are still going through (given the multiple contributing factors/actors to this crisis), the author has done a great job producing a contemporary record on the credit derivatives market and its role in fueling the housing bubble leading up to the crisis.
Obviously, the author deliberately chose to exclude some critical episodes of the credit crisis (such as the SocGen trading scandal, the resulting ill-timed massive cut in Fed funds rate leading to the oil shock of 2008 that partially contributed to the inflation scare and added shock to the economy). She also chose to withhold judgment on policy responses during the early stage of the crisis and exclude the various "local" factors contributing to the subprime housing boom (think Hank Paulson and Ben Bernanke claiming the subprime crisis "being contained", think Barney Frank and his role in shielding Fannie and Freddie from proper oversight, think Clinton and Bush administrations' claim that homeownership was at "historical highs"). She may be right to do so as inclusion of these topics will obfuscate the focus on credit derivatives. An educated reader will want to keep in mind such background information as part of the mosaic of the financial crisis.
Without a full understanding of all the factors contributing to the crisis we find ourselves in, it would be tempting to find solutions that seem to eliminate the excesses of the past years only to sow the seeds for future problems. So-called "always fighting the last war". A simplistic solution to the credit derivatives abuse would be to ban it. A simplistic solution to the failed U.S. auto industry would be to subsidize it with taxpayer funds. A simplistic solution to the housing problem would be to mitigate mortgage foreclosures through taxpayer subsidies (as if everybody who bought a home deserves to live in that home or be a homeowners in the first place).
Gillian Tett was nominated as British Business Journalist of the Year not for this book, but her regular writings in the Financial Times. Her writings in the FT are insightful and timely. This book only reinforces her reputation as one of the best journalists in the field.
On a separate note not related to the book but the book reviews found on Amazon, I find it hard to believe that any review by people who haven't actually read the book is entertained on this site. Simply saying that "I heard this was a good book and I heard the author interviewed" is no qualification for one to write a book review. There is no prize to win from writing the first review, especially when it's only based on hear-say. Anyone who does that is doing the author and intended readers a great disservice, no matter how flattering the review is. Amazon should impose some minimal standard on such postings.
The best book on the crisis, as it relates to Financial Institutions. May 28, 2009
Nicholas Warren (New York, NY USA)
12 out of 13 found this review helpful
An excellent book, engagingly written, tracing the excesses of the credit derivatives and credit structured products that were a major part of the cause of the current crisis.
This book is NOT a overview of the whole crisis. It is specifically intended to concentrate on the aspect above. It is written for those who are generally financially literate (e.g., typical readers of the Financial Times and Wall Street Journal), not for those who are already knowledgeable in credit derivatives and credit structured products (a more expert reader would want explanations at the level of the books by Janet Tavakoli). However, for the primary audience, more basic explanations of CDSs, Synthetic CDOs, Super Senior tranches, ABX indices, Conduits and SIVs etc -- all the specialised vocabulary that has been in the financial news in the last two years -- are quite sufficient and are more than adequate.
What I particularly liked, in addition to the very readable style, was the clarity of the overriding theme of corruption of the products with undiversified sub-prime mortgage assets, exaccerbated by excesses of leverage and shadow-banking vehicles to hold them; how an intelligent set of ideas was perverted in an environment encouraging greed at the expense of prudent risk-taking.
A highly informative book, well researched and written by Gillian Tett. Strongly recommended.
The Type of Book You Can't Put Down July 21, 2009
Keith Otis Edwards (Dearbron, MI United States)
5 out of 6 found this review helpful
Of the recent chronicles of our ongoing financial collapse, this is one of the finest. I'll leave the theoretical hairsplitting to our financial clergy, but for us laity, it's a fast-paced page-turner. It's the type of book you can't put down, but by that I mean that it's a book that you mustn't lay down, because if you stop reading on a Friday and resume the following Monday, will you retain the meaning of all the financial jargon? For us mere mortals, there's a lot of detail here to remember, mostly initials (which Ms. Tett wrongly calls "acronyms"): IIF, ISDA, CDO of ABS, CDOs of CDOs, BISTRO, SIV, &c., &c.
But wait! The good news is that this book has a glossary! -- which most of the other financial-meltdown accounts lack. [Hurrah! Wild cheering!] The bad news is that there are only 25 terms listed in it [cheering dies down], and you're left on your own with such esoteric terms as "ABX derivatives," and the definitions themselves are far from obvious: "SIV: An entity that operates in a manner similar to a conduit but does not enjoy complete credit support from a bank, and has external equity investors who bear the first risk of losses." [cheering turns into a dull murmur]
That's unfortunate, because the general public sorely needs to know what happened, and the news media are apparently unable to provide a coherent and unbiased account. Without a basic understanding of the situation, the average person naturally reverts to his prejudices: that the meltdown was caused by minorities (you know who) purchasing homes that they knew they couldn't afford; that it was nothing more than another case of shysters trying to do an end run around the wise regulators; or, as is commonly believed in Europe, that it's the rotten Americans to blame again (when, actually, half of the CDOs were traded in the UK).
We, reverting to our peasant stock, also want to know who to blame for the mess, so that we can tar-and-feather them, but after reading this book, it's not so clear that any one person or group was to blame. Nor is it clear that the crisis could have been averted if only . . . if only . . . (more regulation, better regulators, Democratic administration -- supply your own pet panacea here). In fact, most people mentioned in this book seem to have conducted themselves admirably, or if not admirably, no worse than you or I would've behaved had we been among the financial elite.
My only complaint about "Fool's Gold" is that there is an occasional wrong word ("fallacious" --pg.113-- is not synonymous with merely "mistaken") or lapse of punctuation. Everyone hits the occasional wrong note, but this is the second book with such defects that I've recently read that was published by Simon and Schuster. Apparently they are too cheap to hire proofreaders. High marks to Ms. Tett; low marks to them.
Great Book On The Role Various Instruments Played in The Current Financial Crisis January 3, 2010
Jacob Wolinsky (monsey, ny)
2 out of 2 found this review helpful
This book review is my fourth, in a series of reviews on the financial crisis. The three previous books I reviewed focused almost entirely on the events leading to the collapse of a specific investment bank. Two books focused on the collapse of Lehman Brothers, and the other book focused on the collapse of Bear Sterns.
Fool's Gold by Gillian Tett is written from a different perspective. While the book is written with an emphasis on JP Morgan, the book is not focused entirely on the firm. The book is an in depth explanation of how a small group of bankers at JP Morgan invented the tools that are now blamed for exacerbating the financial crisis. They invented credit derivatives which were supposed to be beneficial for the economy and the banking system in particular. The author notes the irony, how instruments that were supposed to make banking more efficient, were manipulated by other firms to take undo risks and cause a near collapse of the financial system.
An interesting fact I learned from the book was how the first CDS was created. In 1993, after the Valdez oil spill, Exxon wished to borrow $4.8 billion from JP Morgan. JP Morgan knew Exxon was credit worthy, but did not want to extend them a loan because it would require a large capital reserve and produce little profit. JP Morgan persuaded the European Bank for Reconstruction and Development to insure the loan, while JP Morgan would keep the loan on its books. JP Morgan would pay a small fee to the bank, collect interest and be protected from a default by Exxon. JP Morgan was able to persuade regulators that since JP Morgan had no risk of default from this loan, they should be allowed to reduce capital reserves.
I have two main criticisms of the book. The author does an excellent job explaining the roots of the financial crisis, and the risks undertaken by the various financial institutions. However, the author is scant on detail when the crisis reached its height. I wish she had focused more on the collapse of Lehman Brothers, near collapse of AIG and other firms in late 2008. While the author devoted over 200 pages to explaining the various instruments the banks were using, she only devotes a few pages to the crucial year of the crisis: 2008.
My second criticism is that, although the author focuses almost entirely on the role of credit derivatives. I would have preferred that she also explain the other factors that caused the financial crisis i.e. Government actions, subprime lending etc. However, I do not think her goal in writing the book was to focus exclusively on these instruments and therefore I am not sure my criticism is valid.
Overall, the book is excellent and the author does a superb job in explaining the origination of structured investment vehicles, CDOs, and CDSs and their role in causing the financial crisis. I was surprised to learn the author had no formal education or job in finance, since she seemed to have such an excellent grasp on it, I would not recommend this book for someone who does not have a background in finance/economics. The book explains complex financial instruments which I think most people will have a hard time understanding. However, I think this is a great book for anyone who has an understanding of finance. This is the best publication I have read so far that explains the various instruments the banks created that ultimately lead the world to near financial Armageddon.
Showing reviews 1-5 of 64
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