A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers - Lawrence McDonald & Patrick Robinson

[Saluki]

I have mixed feelings about this book, which I just finished. While it's interesting to get a take on Lehman from someone who was working there at the time, you don't see all the moving pieces from the trading desk.  The book by Ace Greenberg on Bear Stearns was much more illuminating. 

 

Some things which were not to my liking:  The author.  He talks like every other overconfident trader I've ever met and doesn't consider that he could be wrong.  Just like a car salesman can't tell you what is going on in the auto industry, how much insight does a trader hearing bits and pieces second hand really know about the risk management part of a trading house? He says things that he heard, but are clearly wrong, like blaming the implosion in real estate on that right wing shibboleth of saying that allowing low income borrowers to buy houses that they couldn't afford was the underlying cause of the cracks in the market. 40% of home sales during that era were homes that were purchased for investment, or second vacation homes.  But why let facts get in the way of a good bro story? 

 

He overstates his role and Lehman's role in the grand scheme of things.  He couldn't get into Wall Street out of school, and actually peddled meat to supermarkets to get sales experience. Then he started a blog where they analyzed new bond issues (ONLINE!) and when it was bought out, that got his foot in the door at Wall Street. He got in by the back door. He really lays it on thick about how respected and storied Lehman was and how they admired his trading skill. He is obviously biased and won't admit that he's talking about how hot his girlfriend is, who you've never seen, because the other trading houses weren't falling over themselves to hire the meat salesman with a blog. He talks about Lehman like it was in the same league as Goldman, Morgan Stanley or JP Morgan, and not that many people (including me) looked at Lehman as the second tier and did business with them because they took clients and risks that other more respectable houses could pass on. 

 

He has some weird hang up on diversity and kept making snide comments about it.  He thinks it contributed to Lehman's demise because managers were encouraged to go to diversity presentations and "shake hands with lesbians".  He points to the appointment of Erin Callan at the 11th hour as proof of this thesis.  After all the overconfident straight white guys with full heads of hair loaded the company up to 44x leverage, their hedge funds imploded, David Einhorn shorted them, and they wasted the little cash they had left to buy back their stock, he thinks that the Callan was a diversity hire and therefore she's responsible?  By the time she was elevated in 2007, you could've put the most overconfident, straightest, whitest guy with the fullest head of hair and most expensive suit there and it wouldn't make a difference.  

 

Some of trading stories and characters are interesting, but I feel like this is a Rashomon retelling of the great financial crisis where everyone has a different take on the same facts, but one in which they are the hero and everyone else is the villain.  

[Suri22]

yeah i read this like 6 years ago, its a good read , you can feel the vanity of the wall street banks and those who are working there

Edited November 23, 2023 by Suri22