Book Review: “The End of Wall Street” by Roger Lowenstein

I read Roger Lowenstein’s “When Genius Failed” book before. His writing is journalistic and full of facts, unlike some other books like Michael Lewis’ The Big Short. Looks like he’s done a great deal of research in writing this book. It’s mainly about how the then-Secretary-of-Treasury, Hank Paulson, and Federal Reserve Chief, Ben Bernanke, and New York Federal Reserve Bank President, Tim Geithner dealt with the financial crises and the aftermath throughout the year 2007 and 2008. He went to great details about how the crisis – mainly the subprime mortgage came about, its development and its end result.

I learned about how the rescue didn’t take root in the beginning because Benanke was trying to fix the liquidity problem rather than the capital problem. Bernanke was blindsided by his familiarity with the historical ill of the Great Depression in 1930’s. Hank Paulson was hamstrung by his principle of moral hazard – the reckless assumption of risks knowing there’s an insurance or safety nets – the bailout. The logic of letting Lehman die but rescuing Morgan Stanley and AIG was not rational but it was the best the government could do without causing a meltdown and ripple effect across the entire economy.

Whether the Wall Street learned this lesson and the Federal government has re-instated enough regulation to avoid this kind of crisis in the future remains to be seen. I doubt the future generation of the people in Wall Street will remember this hard lesson. History is bound to repeat in the future unless the government comes up with a better set of regulation to control the leverage and risk without overburdening the firms. The author wasn’t optimistic either because the financial instruments being invented were simply too exotic for the government to gauge and the excessive compensation in the Wall Street firms attract envies of the unscrupulous.

So many people were harmed and continued to be harmed by the repercussions of the financial tidal wave of the 2008. One thing people should always remember. When there is too much a good thing like easy credit, no-down-payment mortgage, high-flying stock market (like the tech bubble), something or a bubble is being built up that will eventually bust. Let the common sense rule: when it’s too good to be true, it’s probably so.

The few weeks leading to September 2008 were made for a cliff hanger movie. Most people were too busy to survive financially to pay attention to the drama on the Wall Street and yet it’s where it all started. It’s simply amazing to me how few people (probably no more than a hundred) can cause so much damage. In a way they are the financial terrorists that triggered the financial weapon of mass destruction. Amazing.