Friday, March 27, 2009

House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William Cohan

Any book that has "wretched excess" in the title is sure to grab my attention! Although given the subject matter I would have probably picked up  House of Cards without this particular subtitle.  Books on Wall Street hold some dark fascination and I have read everything from The Predator's Ball by Connie Bruck to Michael Lewis' Liar's Poker

The first section of the book is a detailed a day by day account of the final Bear Stern's meltdown.  There was a lot going on, some of it quite technical.  Cohan struggles to explain a lot of complex and technical transactions and the people at the center of the action. 

There is a lot of technical detail to plow through.  And there are even more people people to keep tract of.  I found myself a little confused by roles, titles and events; never mind the technical parts of the transactions.  In this section, he gets an A for effort and a D for accomplishment.

In part two, he backs up tells the eighty-five year history of Bear Sterns and it's last four CEOs. He draws finely detailed portraits of the men and the corporate culture they fostered.  In part three he details more current history (2001-2008) of the Firm, Wall Street and the US government.  By the time you have read all these pages you really understand how the combination of the men, the government and the corporate cultures on Wall Street worked to bring down the entire firm.  Here he gets an A for effort and a B+ for accomplishment.

I have to say, I was rather disappointed overall.  The book has a thrown together quality about it.  It would have benefited greatly from decent editing.  Much of the material was restated over and over again.  Cohan relies on a lot of quoted statements pulled directly (and indiscriminately) from other sources.  The flow is often confusing and the sequence of the sections didn't work very well. 

Unfortunately, there are some glaring and inexcusable errors as well. The first one is on the very first page where he states that Orlando, Florida is 2,500 miles from New York City.  A simple Google search will tell you it is only 1,081. 

If, however, you are willing to plow through the errors and the extraneous material you will glean a pretty good understanding of what happened at Bear Sterns and why. 

If you do decide to read it, start with part two.

On March 5, 2008, at 10:15 A.M., a hedge fund manager in Florida wrote a post on his investing advice Web site that included a startling statement about Bear Stearns & Co., the nation’s fifth-largest investment bank: “In my book, they are insolvent.”

This seemed a bold and risky statement. Bear Stearns was about to announce profits of $115 million for the first quarter of 2008, had $17.3 billion in cash on hand, and, as the company incessantly boasted, had been a colossally profitable enterprise in the eighty-five years since its founding.

Ten days later, Bear Stearns no longer existed, and the calamitous financial meltdown of 2008 had begun.
How this happened – and why – is the subject of William D. Cohan’s superb and shocking narrative that chronicles the fall of Bear Stearns and the end of the Second Gilded Age on Wall Street. Bear Stearns serves as the Rosetta Stone to explain how a combination of risky bets, corporate political infighting, lax government regulations and truly bad decision-making wrought havoc on the world financial system.

Cohan’s minute-by-minute account of those ten days in March makes for breathless reading, as the bankers at Bear Stearns struggled to contain the cascading series of events that would doom the firm, and as Treasury Secretary Henry Paulson, New York Federal Reserve Bank President Tim Geithner, and Fed Chairman Ben Bernanke began to realize the dire consequences for the world economy should the company go bankrupt.

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