A Colossal failure of Common sense
Friends, I have just finished reading a really nice book discussed below. This is the first time I have tried my hand on writing a book review. I have tried to be very objective and honest. Please let me know your views by posting a comment below.
Background: A Colossal Failure of Common Sense
One date that any person across the world would like to forget in recent times would be September 12, 2008- the day when Lehman Brothers, one of the mighty Investment Banks on Wall Street filed for bankruptcy and set in motion sequence of events which led to one of the most severe recession the World had ever experienced. One question which has still not been answered is what conspired inside such a huge investment bank which led to its dramatic fall?
ďColossal Failure of common sense: The inside story of collapse of Lehman BrothersĒ is an attempt in that direction.
About the Author
Lawrence G McDonald, until 2008 was vice president of distressed debt and convertible securities trading at Lehman Brothers and was considered as the firmís most profitable traders.
About the Book
The book very well describes the causes of crisis and how the seeds of the crisis were sowed with the repealing of Glass-Steagal Act and watered by the subsequent developments in financial markets like wide-spread use of instruments like CDS, MBS etc. One thing for which I really liked the book was the simple way in which such instruments have been explained.
As the title claims, the book does give a good insight into the inside culture and happenings at Lehman Brothers. Different people involved in the decision making hierarchy and their roles have been apt fully described which gives the reader an understanding of what might have happened. For instance, Lehmanís former chief executive, Richard Fuld, who, on reading the book appears to be arrogant, stupid, greedy, reckless and a cause which led Lehman in the mess. Mr. Fuld appears to have supported many others who led to a concentration of risk in the then highly profitable segment of CDOs etc which ultimately led to huge losses and MTM write offs.
It also gives a good account of how Mr Mc Donald and others realized that Lehman might be out in troubled waters early on and how they tried to bring it to the notice of seniors but where put down.
What might disappoint readers are initial few chapters which describe the early life of the author which have no connection what so ever with the Lehman failure. Also, at some points in the book, there has been a considerable room for ambiguity but there are only few of them.
My Personal Opinion
Overall, I would say this would be a good read for people who either have no knowledge or just a basic knowledge of the financial world. If you are an expert, looking for some high profile details of what transpired, you might be disappointed.