Too Big to Fail by Andrew Ross Sorkin

Too Big to Fail pdf

Download Too Big to Fail free PDF by Andrew Ross Sorkin – From Too Big to Fail : In one of the most gripping financial narratives in decades, Andrew Ross Sorkin—a New York Times columnist and one of the country’s most respected financial reporters—delivers the first definitive blow-by-blow account of the epochal economic crisis that brought the world to the brink.

Description Too Big to Fail PDF

Through unprecedented access to the players involved, he re-creates all the drama and turmoil of these turbulent days, revealing never-before-disclosed details and recounting how, motivated as often by ego and greed as by fear and self-preservation, the most powerful men and women in finance and politics decided the fate of the world’s economy.

Editorial Reviews – Too Big to Fail PDF

Review

“Comprehensive and chilling.”
—Time

“. . . His action scenes are intimate and engaging.” 
—The New Yorker

“Sorkin’s prodigious reporting and lively writing put the reader in the room for some of the biggest-dollar conference calls in history. It’s an entertaining book, brisk book . . . Sorkin skillfully captures the raucous enthusiasm and riotous greed that fueled this rational irrationality.”
—The New York Times Book Review

“Brings the drama alive with unusual inside access and compelling detail . . . A deeply researched account of the financial meltdown.”
—BusinessWeek

“Meticulously researched . . . told brilliantly. Other blow-by-blow accounts are in the works. It is hard to imagine them being this riveting.”
—The Economist

“Sorkin’s densely detailed and astonishing narrative of the epic financial crisis of 2008 is an extraordinary achievement that will be hard to surpass as the definitive account . . . as a dramatic close-up, his book is hard to beat.”
—Financial Times

“Sorkin’s book, like its author, is a phenom . . . an absolute tour de force.”
—The American Prospect

“Andrew Ross Sorkin pens what may be the definitive history of the banking crisis.”
—The Atlantic Monthly

“Andrew Ross Sorkin has written a fascinating, scene-by-scene saga of the eyeless trying to march the clueless through Great Depression II.”
Tom Wolfe

“Sorkin has succeeded in writing the book of the crisis, with amazing levels of detail and access.”
Reuters

“Sorkin can write. His storytelling makes Liar’s Poker look like a children’s book.”
—SNL Financial

Review

“Too Big to Fail” is an altogether excellent book by financial journalist Andrew Ross Sorkin. It’s a compelling narrative that tells the story of how the nation’s largest and most prestigious financial institutions came to the brink of collapse – and almost took the entire economy with them – in the great economic crisis of 2008.

According to Sorkin, the financial downturn that occurred in the summer of 2008 was actually years in the making. Many of the nation’s greatest investment banks, along with their commercial bank counterparts, had been busily dealing in high-risk subprime mortgages for years. As long as demand for housing remained high, so did housing prices; however, when massive numbers of people began defaulting on mortgages they could no longer afford, the housing market suddenly crashed, credit froze up, and banks began to fail…

…Thus begins the story of America’s economic meltdown in the late summer and early autumn of 2008. With the collapse of the housing markets, many of America’s oldest and greatest investment banks – among them Bear Stearns, Lehman Brothers, and Morgan Stanley – also find themselves threatened by total failure. So do commercial banks like Citigroup, Wachovia, and Bank of America; insurance companies like AIG; and the two government sponsored mortgage guarantors (Fannie Mae and Freddie Mac). Now, U.S. Treasury Secretary Hank Paulson, New York Federal Reserve Bank President Timothy Geithner, Congress, and other government regulators must find a way to save these financial institutions from ruin. If they don’t, America faces the very real possibility that its entire economic system may collapse…

I read “Too Big to Fail” not long after watching the HBO movie upon which it’s based. I was actually very impressed by how well written this book is. Andrew Ross Sorkin is a highly knowledgeable financial journalist who is also a very gifted storyteller. He writes with prose that is both clear and concise. He makes highly complex financial matters easy to understand by explaining them with a minimum of technical jargon. His portraits of the key players in the drama – Hank Paulson, Tim Geithner, Dick Fuld, Chris Flowers, and Erin Callan, among others – are unbiased, allowing readers to form their own judgments about them. Best of all, Sorkin avoids making “Too Big to Fail” a political treatise, focusing instead on the efforts of government officials and Wall Street executives to bring the nation back from the precipice of financial disaster.

“Too Big to Fail” is actually quite a page-turner. Sorkin tells his story in a crisp, fast-paced narrative style that’s never boring. Overall, I found it a very enjoyable and informative reading experience. Highly recommended.

Author’s Note – Too Big to Fail PDF

This book is the product of more than five hundred hours of interviews with more than two hundred individuals who participated directly in the events surrounding the financial crisis. These individuals include Wall Street chief executives, board members, management teams, current and former U.S. government officials, foreign government officials, bankers, lawyers, accountants, consultants, and other advisers. Many of these individuals shared documentary evidence, including contemporaneous notes, e-mails, tape recordings, internal presentations, draft filings, scripts, calendars, call logs, billing time sheets, and expense reports that provided the basis for much of the detail in this book. They also spent hours painstakingly recalling the conversations and details of various meetings, many of which were considered privileged and confidential. Given the continuing controversy surrounding many of these events— several criminal investigations are still ongoing as of this writing, and countless civil lawsuits have been filed—most of the subjects interviewed took part only on the condition that they not be identified as a source. As a result, and because of the number of sources used to confirm every scene, readers should not assume that the individual whose dialogue or specific feeling is recorded was necessarily the person who provided that information. In many cases the account came from him or her directly, but it may also have come from other eyewitnesses in the room or on the opposite side of a phone call (often via speakerphone), or from someone briefed directly on the conversation immediately afterward, or, as often as possible, from contemporaneous notes or other written evidence. Much has already been written about the financial crisis, and this book has tried to build upon the extraordinary record created by my esteemed colleagues in financial journalism, whose work I cite at the end of this volume. But what I hope I have provided here is the first detailed, momentby-moment account of one of the most calamitous times in our history. The individuals who propel this narrative genuinely believed they were—and may in fact have been—staring into the economic abyss. Galileo Galilei said, “All truths are easy to understand once they are discovered; the point is to discover them.” I hope I have discovered at least some of them, and that in doing so I have made the often bewildering financial events of the past few years a little easier to understand

Prologue – Too Big to Fail PDF

Standing in the kitchen of his Park Avenue apartment, Jamie Dimon poured himself a cup of coffee, hoping it might ease his headache. He was recovering from a slight hangover, but his head really hurt for a different reason: He knew too much. It was just past 7:00 a.m. on the morning of Saturday, September 13, 2008. Dimon, the chief executive of JP Morgan Chase, the nation’s thirdlargest bank, had spent part of the prior evening at an emergency, all-handson-deck meeting at the Federal Reserve Bank of New York with a dozen of his rival Wall Street CEOs. Their assignment was to come up with a plan to save Lehman Brothers, the nation’s fourth-largest investment bank—or risk the collateral damage that might ensue in the markets. To Dimon it was a terrifying predicament that caused his mind to spin as he rushed home afterward.(Too Big to Fail PDF)

He was already more than two hours late for a dinner party that his wife, Judy, was hosting. He was embarrassed by his delay because the dinner was for the parents of their daughter’s boyfriend, whom he was meeting for the first time. “Honestly, I’m never this late,” he offered, hoping to elicit some sympathy. Trying to avoid saying more than he should, still he dropped some hints about what had happened at the meeting. “You know, I am not lying about how serious this situation is,” Dimon told his slightly alarmed guests as he mixed himself a martini. “You’re going to read about it tomorrow in the papers.” As he promised, Saturday’s papers prominently featured the dramatic news to which he had alluded. Leaning against the kitchen counter, Dimon opened the Wall Street Journal and read the headline of its lead story: “Lehman Races Clock; Crisis Spreads.” Dimon knew that Lehman Brothers might not make it through the weekend. JP Morgan had examined its books earlier that week as a potential lender and had been unimpressed. (Too Big to Fail PDF)

He also had decided to request some extra collateral from the firm out of fear it might fall. In the next twenty-four hours, Dimon knew, Lehman would either be rescued or ruined. Knowing what he did, however, Dimon was concerned about more than just Lehman Brothers. He was aware that Merrill Lynch, another icon of Wall Street, was in trouble, too, and he had just asked his staff to make sure JP Morgan had enough collateral from that firm as well. And he was also acutely aware of new dangers developing at the global insurance giant American International Group (AIG) that so far had gone relatively unnoticed by the public—it was his firm’s client, and they were scrambling to raise additional capital to save it. By his estimation AIG had only about a week to find a solution, or it, too, could falter. Of the handful of principals involved in the dialogue about the enveloping crisis—the government included—Dimon was in an especially unusual position. He had the closest thing to perfect, real-time information. (Too Big to Fail PDF)

That “deal flow” enabled him to identify the fraying threads in the fabric of the financial system, even in the safety nets that others assumed would save the day. Dimon began contemplating a worst-case scenario, and at 7:30 a.m. he went into his home library and dialed into a conference call with two dozen members of his management team. “You are about to experience the most unbelievable week in America ever, and we have to prepare for the absolutely worst case,” Dimon told his staff. “We have to protect the firm. This is about our survival.” His staff listened intently, but no one was quite certain what Dimon was trying to say. Like most people on Wall Street—including Richard S. Fuld Jr., Lehman’s CEO, who enjoyed one of the longest reigns of any of its leaders— many of those listening to the call assumed that the government would intervene and prevent its failure. Dimon hastened to disabuse them of the notion. (Too Big to Fail PDF)

“That’s wishful thinking. There is no way, in my opinion, that Washington is going to bail out an investment bank. Nor should they,” he said decisively. “I want you all to know that this is a matter of life and death. I’m serious.” Then he dropped his bombshell, one that he had been contemplating for the entire morning. It was his ultimate doomsday scenario. “Here’s the drill,” he continued. “We need to prepare right now for Lehman Brothers filing.” Then he paused. “And for Merrill Lynch filing.” He paused again. “And for AIG filing.” Another pause. “And for Morgan Stanley filing.” And after a final, even longer pause he added: “And potentially for Goldman Sachs filing.” There was a collective gasp on the phone. As Dimon had presciently warned in his conference call, the following days would bring a near collapse of the financial system, forcing a government rescue effort with no precedent in modern history. In a period of less than eighteen months, Wall Street had gone from celebrating its most profitable age to finding itself on the brink of an epochal devastation. Trillions of dollars in wealth had vanished, and the financial landscape was entirely reconfigured. The calamity would definitively shatter some of the most cherished principles of capitalism. (Too Big to Fail PDF)

The idea that financial wizards had conjured up a new era of low-risk profits, and that American-style financial engineering was the global gold standard, was officially dead. As the unraveling began, many on Wall Street confronted a market unlike any they had ever encountered—one gripped by a fear and disorder that no invisible hand could tame. They were forced to make the most critical decisions of their careers, perhaps of their lives, in the context of a confusing rush of rumors and policy shifts, all based on numbers that were little more than best guesses. Some made wise choices, some got lucky, and still others lived to regret their decisions. In many cases, it’s still too early to tell whether they made the right choices. In 2007, at the peak of the economic bubble, the financial services sector had become a wealth-creation machine, ballooning to more than 40 percent of total corporate profits in the United States. (Too Big to Fail PDF)

Financial products—including a new array of securities so complex that even many CEOs and boards of directors didn’t understand them—were an ever greater driving force of the nation’s economy. The mortgage industry was an especially important component of this system, providing loans that served as the raw material for Wall Street’s elaborate creations, repackaging and then reselling them around the globe. With all the profits that were being generated, Wall Street was minting a new generation of wealth not seen since the debt-fueled 1980s. Those who worked in the finance industry earned an astounding $53 billion in total compensation in 2007. Goldman Sachs, ranked at the top of the five leading brokerages at the onset of the crisis, accounted for $20 billion of that total, which worked out to more than $661,000 per employee. The company’s chief executive officer, Lloyd Blankfein, alone took home $68 million. Financial titans believed they were creating more than mere profits, however. They were confident that they had invented a new financial model that could be exported successfully around the globe. (Too Big to Fail PDF)

“The whole world is moving to the American model of free enterprise and capital markets,” Sandy Weill, the architect of Citigroup, said in the summer of 2007, “Not having American financial institutions that really are at the fulcrum of how these countries are converting to a free-enterprise system would really be a shame.” But while they were busy evangelizing their financial values and producing these dizzying sums, the big brokerage firms had been bolstering their bets with enormous quantities of debt. Wall Street firms had debt to capital ratios of 32 to 1. When it worked, this strategy worked spectacularly well, validating the industry’s complex models and generating record earnings. When it failed, however, the result was catastrophic. The Wall Street juggernaut that emerged from the collapse of the dotcom bubble and the post-9/11 downturn was in large part the product of cheap money. The savings glut in Asia, combined with unusually low U.S. interest rates under former Federal Reserve chairman Alan Greenspan (which had been intended to stimulate growth following the 2001 recession), began to flood the world with money. (Too Big to Fail PDF)

The crowning example of liquidity run amok was the subprime mortgage market. At the height of the housing bubble, banks were eager to make home loans to nearly anyone capable of signing on the dotted line. With no documentation a prospective buyer could claim a six-figure salary and walk out of a bank with a $500,000 mortgage, topping it off a month later with a home equity line of credit. Naturally, home prices skyrocketed, and in the hottest real estate markets ordinary people turned into speculators, flipping homes and tapping home equity lines to buy SUVs and power boats. At the time, Wall Street believed fervently that its new financial products —mortgages that had been sliced and diced, or “securitized,” had diluted, if not removed, the risk. Instead of holding onto a loan on their own, the banks split it up into individual pieces and sold those pieces to investors, collecting enormous fees in the process. But whatever might be said about bankers’ behavior during the housing boom, it can’t be denied that these institutions “ate their own cooking”—in fact, they gorged on it, buying mountains of mortgage-backed assets from one another. But it was the new ultra-interconnectedness among the nation’s financial institutions that posed the biggest risk of all. (Too Big to Fail PDF)

As a result of the banks owning various slices of these newfangled financial instruments, every firm was now dependent on the others—and many didn’t even know it. If one fell, it could become a series of falling dominoes. There were, of course, Cassandras in both business and academia who warned that all this financial engineering would end badly. While Professors Nouriel Roubini and Robert J. Shiller have become this generation’s muchheralded doomsayers, even as others made prescient predictions as early as 1994 that went unheeded. “The sudden failure or abrupt withdrawal from trading of any of these large U.S. dealers could cause liquidity problems in the markets and could also pose risks to others, including federally insured banks and the financial system as a whole,” Charles A. Bowsher, the comptroller general, told a congressional committee after being tasked with studying a developing market known as derivatives. “In some cases intervention has and could result in a financial bailout paid for or guaranteed by taxpayers.” But when cracks did start to emerge in 2007, many argued even then that subprime loans posed little risk to anyone beyond a few mortgage firms. (Too Big to Fail PDF)

“The impact on the broader economy and the financial markets of the problems in the subprime markets seems likely to be contained,” Ben S. Bernanke, the chairman of the Federal Reserve, said in testimony before Congress’s Joint Economic Committee in March 2007. By August 2007, however, the $2 trillion subprime market had collapsed, unleashing a global contagion. Two Bear Stearns hedge funds that made major subprime bets failed, losing $1.6 billion of their investors’ money. BNP Paribas, France’s largest listed bank, briefly suspended customer withdrawals, citing an inability to properly price its book of subprime-related bonds. That was another way of saying they couldn’t find a buyer at any reasonable price. In some ways Wall Street was undone by its own smarts, as the very complexity of mortgage-backed securities meant that almost no one was able to figure out how to price them in a declining market. (As of this writing, the experts are still struggling to figure out exactly what these assets are worth.) Without a price the market was paralyzed. And without access to capital, Wall Street simply could not function. Bear Stearns, the weakest and most highly leveraged of the Big Five, was the first to fall. But everyone knew that even the strongest of banks could not withstand a full-blown investor panic, which meant that no one felt safe and no one was sure who else on the Street could be next. (Too Big to Fail PDF)

It was this sense of utter uncertainty—the feeling Dimon expressed in his shocking list of potential casualties during his conference call—that made the crisis a once-in-a-lifetime experience for the men who ran these firms and the bureaucrats who regulated them. Until that autumn in 2008, they had only experienced contained crises. Firms and investors took their lumps and moved on. In fact, the ones who maintained their equilibrium and bet that things would soon improve were those who generally profited the most. This credit crisis was different. Wall Street and Washington had to improvise. In retrospect, this bubble, like all bubbles, was an example of what, in his classic 1841 book, Scottish author Charles Mackay called “Extraordinary Popular Delusions and the Madness of Crowds.” Instead of giving birth to a brave new world of riskless investments, the banks actually created a risk to the entire financial system. But this book isn’t so much about the theoretical as it is about real people, the reality behind the scenes, in New York, Washington, and overseas—in the offices, homes, and minds of the handful of people who controlled the economy’s fate—during the critical months after Monday, March 17, 2008, when JP Morgan agreed to absorb Bear Stearns and when the United States government officials eventually determined that it was necessary to undertake the largest public intervention in the nation’s economic history. For the past decade I have covered Wall Street and deal making for the New York Times and have been fortunate to do so during a period that has seen any number of remarkable developments in the American economy. (Too Big to Fail PDF)

But never have I witnessed such fundamental and dramatic changes in business paradigms and the spectacular self-destruction of storied institutions. This extraordinary time has left us with a giant puzzle—a mystery, really —that still needs to be solved, so we can learn from our mistakes. This book is an effort to begin putting those pieces together. At its core Too Big to Fail is a chronicle of failure—a failure that brought the world to its knees and raised questions about the very nature of capitalism. It is an intimate portrait of the dedicated and often baffled individuals who struggled—often at great personal sacrifice but just as often for selfpreservation—to spare the world and themselves an even more calamitous outcome. It would be comforting to say that all the characters depicted in this book were able to cast aside their own concerns, whether petty or monumental, and join together to prevent the worst from happening. In some cases, they did. But as you’ll see, in making their decisions, they were not immune to the fierce rivalries and power grabs that are part of the longestablished cultures on Wall Street and in Washington. In the end, this drama is a human one, a tale about the fallibility of people who thought they themselves were too big to fail.

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About the Author

Andrew Ross Sorkin is the award-winning chief mergers and acquisitions reporter for The New York Times, a columnist, and assistant editor of business and finance news. He is also the editor and founder of DealBook, an online daily financial report. He has won a Gerald Loeb Award, the highest honor in business journalism, and a Society of American Business Editors and Writers Award. In 2007, the World Economic Forum named him a Young Global Leader.

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