Book review: Too big to fail

The inside story of how Wall Street and Washington fought to save the financial system- and themselves

In September 2008, at the height of the financial crisis and during the months that followed, the interplay between business leaders, regulators, and politicians was a blizzard of meetings, phone calls, yelling matches, and emails that went round the clock and around the world. In this book, The New York Times reporter, Andrew Ross Sorkin, sets out to tell the story of how the individuals at the centre of the storm reacted under pressure.

Too Big to Fail is not a story about why the financial crisis occurred. Instead, it describes how the crucial decisions came to be made. Sorkin was granted exclusive interviews with many key figures. He also makes full use of the sources he has acquired doing his day job. He is able to put together a very credible narrative of how events unfolded.

Too Big to Fail is an American-centric tale. It makes no mention of collapse of the British bank and mortgage originator, Northern Rock, one of the harbingers of the crisis. Likewise, the problems of Swiss bank, UBS, and the British banks, Royal Bank of Scotland and Lloyds TSB, are all given little mention. The credit crisis was as severe in the United Kingdom as it was in America and yet the international response is given little coverage. Sorkin's account gives the impression that it was very much an American crisis and could only have an American solution.

The characters in the story make Too Big to Fail an enjoyable read. Many of them have obvious flaws. It is striking how little the private sector leaders appear to have understood about the operations of government and vice-versa. Many elected officials were unable to comprehend what was causing the drastic fall in economic output, while the financiers failed to explain their problems and ideas in a clear manner to the correct government counterparties. The present US Treasury Secretary, Timothy Geither, who was, for most of the period covered here, the President of the Federal Reserve, comes across as the only key figure capable of understanding both the private and public sectors. He quickly finds himself acting as the bridge between the two sides as they race against the clock to prevent further bank failures.

Sorkin quotes all of the central characters directly and many of them use a litany of four-letter words when describing how they felt during the most frustrating moments. There is no shortage of good quotes, including many that the some of them would no doubt wish to retract. For example, the CEO of Goldman Sachs, Lloyd Blankfein, said of the crisis in April 2008, "we're closer to the end than the beginning", five months later Lehman Brothers collapsed. The book does not describe in detail the problems associated with particular accounting and financial products. Sorkin strives to make the story readable and entertaining. This story will be retold many times but Too Big to Fail is a good read, published before we move onto the next crisis.

Comments