Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System from Crisis
The September 2008 week in which WaMu failed, from the regulators' side.
Summary
Andrew Ross Sorkin, a New York Times reporter, reconstructed the events of 2008 from interviews with several hundred participants and produced the most detailed narrative account of what the people involved did and said.
The book is organised chronologically through the year, following the principals: Henry Paulson at the Treasury, Timothy Geithner at the New York Federal Reserve, Ben Bernanke at the Board, and the chief executives of the major institutions including Richard Fuld at Lehman, Jamie Dimon at JPMorgan, Lloyd Blankfein at Goldman Sachs, John Mack at Morgan Stanley and Vikram Pandit at Citigroup. It covers Bear Stearns, the Fannie Mae and Freddie Mac conservatorships, the Lehman weekend, the AIG intervention, the money market fund guarantee, the Troubled Asset Relief Program and the capital injections into the major banks.
Sorkin's method produces extraordinary detail about meetings and conversations, reconstructed from participant recollection. That is also the book's limitation: it reports what people told him afterward, which is subject to the ordinary distortions of self-interested recollection, and it is stronger on what happened than on why the crisis occurred. Readers wanting analysis should go elsewhere, including to Gorton on the run mechanism and to Ball on the Lehman decision. As a record of how a small group of people made enormous decisions under time pressure with inadequate information, it is unmatched.
Key takeaways 7
- Decisions of enormous consequence were made in hours by a small group of people with incomplete information about the institutions involved.
- Personal relationships and rivalries among chief executives affected which rescue arrangements were possible.
- Lehman failed partly because no acquirer would take it without government support that Paulson had publicly refused to provide.
- AIG was rescued days after Lehman failed because its derivative counterparties included every major institution.
- The capital injections into major banks were imposed collectively so that no individual bank would be identified as weak by accepting them.
- Sorkin's account is reconstructed from participant recollection, which is subject to the distortions of self-interested memory.
- The book records what happened in detail and offers little analysis of why the crisis occurred.
Who should read it
Readers who want the definitive narrative reconstruction of the 2008 crisis decisions, supplemented by analytical accounts of the underlying mechanism.
About Andrew Ross Sorkin
New York Times columnist, founder and editor-at-large of DealBook; CNBC Squawk Box co-anchor
Too Big to Fail is the standard blow-by-blow reconstruction of the 2008 crisis and is cited across the crisis literature.
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