A Colossal Failure of Common Sense

Nov 30, 2024 2:27 AM

Author:Larry McDonald,Patrick Robinson

When Lehman Brothers bank went under, the world gasped. One of the world's biggest and most successful banks, its downfall was the event that sparked the slide of the world economy toward a Great Depression II.

This is the gripping inside story of the dark characters who ruled Lehman, who refused to heed warnings that the company was headed for an iceberg; the world-class, mid-level people who valiantly fought to get Lehman off its disastrous course; the crash that didn't have to happen. A news-breaking explanation that answers the question everyone still asks: "why did it happen?"

Larry McDonald, a former vice-president at Lehman Brothers in charge of distressed debt trading and convertible securities, was right at the centre of the meltdown of the company and gives an intimate look at the madhouse that Lehman became. This book shows beyond a doubt that Richard Fuld, the long-time CEO of Lehman, and his top executives, were totally out to lunch, allowing Lehman's risk profile to reach gargantuan proportions.

While the traders, like Larry McDonald, clearly predicted more than two years in advance that the market for packaged subprime mortgages and credit default swaps would evaporate, the high-flying Lehman bosses pushed hard on the gas pedal until the very end.

Reviews

Bold and confident ... Coggan covers the terrain with characteristic calmness and objectivity, avoids over-simplification, and laces his arguments with his trademark erudition ... The alphabet soup of acronyms, from SIVs to CDO Squareds, is blissfully lacking ... Finally, the book is free from the shrieking ideology that afflicts virtually all contemporary debates over money. Indeed, it offers a clear explanation of the fresh ideological divisions that have arisen over how to deal with the crisis ... the book should be taken very seriously

—— Financial Times

This book stands way above anything written on the present economic crisis

—— Nassim Nicholas Taleb, author of 'The Black Swan'

The most illuminating account of the financial crisis to appear to date ... [written] with a lucidity that enables him to convey deep insights without a trace of jargon ... [a] thought-stirring book

—— John Gray , New Statesman

A remarkable book from one of the most respected economics journalists on the planet. Every page brings a fresh insight or a new surprise. A delight

—— Tim Harford, author of 'The Undercover Economist'

Fascinating and authoritative, with the rigour and depth to satisfy an economist and the accessibility and pace to engage the layperson ... If everyone read Coggan's book we might just be a little more circumspect if and when the next burst of irrational exuberance overtakes the economy

—— Management Today

A masterful history of financial crises

—— Independent

By far the best analysis of the "new normal"

—— David Stevenson , Financial Times

An excellent book ... a smart and witty analysis of the current economic storm, set in the context of the history of money

—— David Wighton , The Times

Coggan is ... an exceptional banking and economic historian

—— Irish Examiner

Coggan traces 'history's tug of war between monetary shortage and excess' in this engaging and timely book about the current financial crisis.... Thoughtful and thorough

—— Publishers Weekly

Intriguing

—— Irish Independent

Coggan ... deserves his Best Communicator award: he moves the story along at a fast and flowing pace, combined with the ability to find the short phrase that summarizes in simple language the kernel of many complex economic ideas ... demonstrates a comprehensive awareness of the major academic debates in economics and economic history ... deserves to be one of the three books you read from the vast literature spawned by the recent crisis

—— John Gent , LSE blog

A very good and sensible introduction to the history of the recent economic crisis, with an emphasis on debt and also historical perspective

—— Tyler Cowen Blog

Paper Promises is not only a great book, it is a great accomplishment - a brilliant work of financial history, a clear examination of the present moment, and a journalistic masterpiece all wrapped into one

—— 800-CEO-READ

A crisply written look at how the debt crisis may overturn the global economic order ... Like a battlefield guide, Coggan takes us on a tour of paper promises, wending from John Law's monetary experiments in France following the death of Louis XIV to Ben Bernanke's quantitative easing ... A valuable primer to anyone who still asks, as his father-in-law did, where all the money went during the meltdown of 2007 and '08

—— Bloomberg

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