Book Review: “Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System–and Themselves” by Andrew Ross Sorkin

Just finished the long audiobook. Wow, I don’t know how the author did it, the book reads like a novel with all the conversations among the key players of the economic disaster of the 2008. I’m really shocked about how clueless the top echelon in the financial industry, which may have contributed to the fiasco in the first place.

The reward system of the financial industry appears to be morbid. The more risk a person take, the more he gets rewarded if he got lucky but the company and in this case the US tax players bear the risks and consequences.

Solving the 2008 problem was not something one can figure out from textbook. Even the government officials like Hank Paulson, Ben Bernanke and Tim Geithner were short of the experience in handling it and they had to play be ears as waves and waves of financial shock hit the industry (like the flip-flopping of buying up toxic assets and injecting capital directly in the troubled company) , which is and was essential connected like a web of dominoes. When one falls, it would drag down the rest of the industry given the size the leverage the people are taking. In this case, it started out from Bears Stearn, then Lehman Brothers, then AIG. The others are teetering on the edge of bankruptcy until the major rescue with TARP.

Warren Buffet seemed to be tapped frequently as the white knight to buy cheap assets when the financial companies were in a dire need of capital. It really helps to have lots of cash and be an able and willing funding source of the last resort. I think only the Fed can claim to be one, an official one, nevertheless.

There are a few interesting events like hand carrying a check of $9 Billions from Japan back to Morgan Stanley because of a bank holiday preventing wire transfer, shotgun wedding meetings arranged by Paulson and Geithner, forced feed of capital injection into the 9 major financial firms to beef up their balance sheet and to avoid a financial Armageddon.

After reading this book, I can’t help to be cynical of the investment banks and the financial industry in general. How does one get to be paid millions in bonus and not having to risk anything?

This is a good book depicting the greed and shallowness of the people involved. The characters and their names were difficult to follow except for the key ones. There are sufficient details in the book for the future historian to judge what happened. I have made my conclusion.