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FDL Book Salon Welcomes Andrew Ross Sorkin, Too Big To Fail

Andrew Ross Sorkin - Too Big To Fail[Welcome Andrew Ross Sorkin, and Host Felix Salmon.] [As a courtesy to our guests, please keep comments to the book.  Please take other conversations to a previous thread. Рbev]

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

There has been no shortage of crisis books published of late, but Too Big To Fail is by far the biggest and most detailed of them. Full to bursting with facts both momentous and trivial, it presents to us the story of the crisis in close-up detail.

No one comes out of this book smelling particularly fragrant: it’s a story without heroes. There are the obvious villains, like Lehman’s Dick Fuld, of course, but everybody else, up to and including Tim Geithner and Hank Paulson, ends up doing things which, in hindsight, looked panicked and ill-thought through.

That shouldn’t come as much of a surprise, given how little sleep these people were working on and how many balls were in the air at any given time: the desperate needs of AIG, for instance, were relegated to the back burner during the most fraught weekend in September as everybody scrambled — unsuccessfully — to try to save Lehman.

Still, there are many scenes, from the big (Paulson secretly meeting with the board of Goldman Sachs in Moscow) to the small (John Mack of Morgan Stanley instructing his driver to commandeer Manhattan’s west-side bike path) which show just how much the bubble of privilege can skew the world-view of the rich and powerful: they genuinely think that the normal rules don’t apply to them.

The financial overclass is paying itself record bonuses again this year, thanks to the extraordinary amounts of money that Geithner, Paulson, and Bernanke pumped and are still pumping into the banking system. Next week, a large subset of that overclass will meet in self-congratulatory mode in an exclusive Swiss ski resort, to ogle each others’ jets, pat each other on the back, and talk with great seriousness and gravitas about the problems facing the world.

The financial system is still standing, and that has allowed the relatively small cast of characters in Sorkin’s book to convince themselves that they did whatever was necessary to save the world. But substantially all of those people were part of the problem too — and many of them are still around, collecting their eight-figure bonuses, and convincing themselves that their monster paychecks are an indication of how very valuable they are, both to their firms and to the global economy as a whole.

This book is a portrait of fallible humans struggling with forces largely beyond their control. But looking at the behavior of those humans today, it seems they haven’t been particularly humbled. Maybe they should read Too Big To Fail on their flights to Davos, and ask themselves whether the hubris of a conference committed to “improving the state of the world” is in fact a large part of what caused the crisis in the first place.

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Felix Salmon

Felix Salmon