Law Religion Culture Review

Exploring the intersections of law, religion and culture. Copyright by Richard J. Radcliffe. All rights reserved.

Friday, November 13, 2009

Book Review: A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers by Lawrence G. McDonald with Patrick Robinson.

This book can be synopsized: We were right; they were wrong.

The "they" are primarily former CEO of Lehman Brothers, Richard S. Fuld, Jr., and former President Joseph M. Gregory.

The "we"? Author Lawrence G. McDonald (a former VP of Lehman), of course, and a handful of his colleagues at Lehman.

The book repeatedly belittles the intelligence of the "they" while extolling the genius of the contrarians, the "we". Regarding Fuld, he's described in one withering passage "as a slightly pathetic, out-of-touch, confused old guy who was in office past his time, struggling with a 1970s playbook in a 2008 game." (300.) Contrasting that description, McDonald writes about his "supreme team" of "Wall Street masters", who were "the best there ever had been". (279.) His team was comprised of "the big brains that lived in fear of the small ones", i.e. the "they". (279.)

McDonald even concedes a good measure of "hindsight" guides his narrative (e.g., 196), but he does record instances where the "we" not only were objecting months and years before Lehman's bankruptcy filing on September 15, 2008, but actively taking positions that seemed contrary to the "they"'s real estate-laden agenda--for example, shorting builders' and banks' stocks.

McDonald characterizes his book as a "Wall Street thriller". (342.) If there is such a genre, this book definitely qualifies. On the "Wall Street" side, McDonald does an excellent job explaining CDOs (collateralized debt obligations), CLOs (collateralized loan obligations), CMBSs (commercial mortgage-backed securities), CDSs (credit default swaps), and the circumstances (e.g. the 1999 repealing of the Glass-Steagell Act of 1933 [3]) that led to Lehman's demise as well as the near crippling of the US (and world) economy. On the "thriller" side, McDonald and Robinson do so with a fast-paced story that is laced with uncommon wit and turns-of-phrases.

For example, "I didn't think we'd need to buy wine for the Christmas party, since the mortgage guys could probably produce chateau-bottled vintages from tap water, a technique hitherto regarded as a dying art." (113.)

As an added bonus, McDonald wraps his engaging personal story about his climb to Wall Street around the financial debacle of our time. For instance, his stories about how he bravely tried to find employment on Wall Street by posing as a pizza delivery person to get to the decision-makers echo stunts one might see in a movie.

If you are interested in learning how Wall Street was brought to its knees in 2008, McDonald and Robinson's book does so in a most entertaining way. It marries a creditable explication of the financial, legal, political and personal reasons with the riveting story-telling instincts of a Spielberg.

Highly recommended.

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