A fly-on-the-wall account of the financial crisis

When Warren Buffett finished reading this book he sent a telegram to its author saying “Congratulations! Your book will be bigger than this telegram!”

Andrew Ross Sorkin’s Too Big To Fail - Inside the Battle to Save Wall Street, is a “fly on the wall account” of the start of the current financial crisis. Sorkin, a journalist with the New York Times, if we were to hazard a guess, in his younger days, must have grown up reading a lot of Robert Ludlum thrillers.

This book reads like a Ludlum thriller, except that there are no guns. Events unfold at an astonishing pace and characters appear and disappear to appear again.

As Sorkin says, the book is a “tale about the fallibility of people, who thought they themselves were too big to fail.”

The book has Henry “Hank” Paulson, the treasury secretary under the presidency of George Bush, as the central character, who is trying to deal with the negative effects of the financial system unravelling.

Paulson, a former CEO of Goldman Sachs, is shown as a shrewd man, who is trying to take everyone along, and keeps looking for solutions to save the American financial system. “If you’re going to ride the pony, sometimes you have to step in the shit,” Paulson is supposed to have remarked, just after the British bank, Barclays, was not allowed to buy the crisis hit investment bank Lehman Brothers.

At that point, the US government was trying to save the bank by selling to another big bank. Barclays Bank of the United Kingdom emerged as a buyer, late in the day, but the British government put its foot down on the buy as it did not want to import the troubles of the American financial system. An exasperated Paulson is then supposed to have remarked that the British had “grin-fucked us.”

Such situations showing the frailty of human beings emerge throughout the book, wherein its lead characters, the Wall Street CEOs and the regulators are unable to do anything about a situation they are trying to tackle.

The F-word appears throughout the book showing the frustration of its lead players, with everyone from Paulson to Timothy Geithner (then chairman of the Federal Reserve of New York, and now the treasury secretary under Barack Obama) to all the Wall Street CEOs using it at regular intervals. This is the real strength of the book with Sorkin bringing out very clearly what is going on in the minds of the various protagonists. As a reader you really start to feel for the people involved.

The best part of the book is the one that deals with Richard Severin Fuld, Jr. (better known as Dick Fuld), the then CEO of Lehman Brothers. As the crisis unfolds, Fuld is initially sure of saving Lehman.

But as we go along, Fuld’s confidence takes a huge beating as he was sidelined completely from the Lehman rescue process.
“At this point it doesn’t matter what Dick Fuld thinks,” Paulson is supposed to have remarked while trying to sell Lehman to Bank of America. At the same time the short sellers were having a field day on the Lehman stock knocking down the price big time, and the Wall Street CEOs not responding to his calls at extremely crucial points of time. In the end, when Lehman is asked to file for bankruptcy, all Fuld can come up with is, “well, I guess this is good-bye.”

Other than the human angle, the book also brings out the haphazardness of the entire situation. The government stepped in to save Fannie Mae and Freddie Mac, the government sponsored home loan companies. But a little later, it let Lehman Brothers go under, primarily because as Paulson put it “I can’t be Mr Bailout”. But two days later, the government rescued the insurance AIG when it realised that letting AIG go would be a huge systemic threat.

As Ben Bernanke put it and Sorkin quotes in the book “There are no atheists in foxholes and no ideologues in financial crises.”
Too Big to Fail is a dramatic retelling of the financial crisis as it first unfolded. What it lacks is analysis. But that was never really the idea behind this book.

Reiterating, it reads like a Ludlum thriller, and once you start reading, it’s completely unputdownable. Go pick it up.