Andrew Ross Sorkin is one of The New York Times’ chief financial reporters, and he’s written an account of the 2008 crisis in such detail that it often feels like real time. My knowledge of economics comes from a couple graduate-level courses, people I know who work at investment banks and reading books like these (which is to say, I’m a dilettante), but Sorkin’s book felt so insider-y as to beg the question: Does all this really matter? After all, these assholes got what they needed from the government and now it’s back to business as usual. History’s already repeated itself, so what’s the point of recounting this perilous moment in our nation’s history without the benefit of more hindsight? After reading the book’s afterword, I finally understood (sort of) what Sorkin was trying to do, but it shouldn’t have taken me 600 pages to get there.
Too Big To Fail, which is meant to read like a thriller, starts off with the guy we slowly realize is the least-biggest asshole, JP Morgan CEO Jamie Dimon, fretting over the top-secret meeting at the New York Fed to come up with a private-sector solution to save Lehman Brothers before it goes under—which, as we all know, it did, filing for Chapter 11 bankruptcy a few days later. Dimon terrifies his board by proposing worst-case scenarios of Merrill Lynch going down, Morgan Stanley going down, and even the Holy Grail of investment banking, Goldman Sachs, being forced to file. This prospect is supposed to strike fear in the hearts of layreaders, let them know how truly serious this situation was, but we’re to be forgiven for the little tumors of rage that begin sprouting up in our temples—even those of us who supported the bailout at the time and consider ourselves “above” giving in to populist anger. (That said, there’s always been such a patronizing air on the part of finance guys—so few of them are women, of course—that the real reason for the public’s fury at Wall Street is about not much more than bitterness. Hey, these self-made kings can’t help it if they’re smarter and richer than everybody else, and besides, they work hard for their multi-million dollar bonuses and abominable tax loopholes. One thing I’ve come to learn about very high-achieving people is that they almost always believe they work harder than absolutely everybody else, and are therefore entitled to whatever perks come their way. It’s bullshit, of course, but this misconception is built on a fulcrum that certainly won’t be brought down by a mere financial crisis and the failure of a couple of investment banks.)
But I digress. After Dimon’s prophesy, we move back to March of 2008, when Bear Stearns, the first of the Big Five investment banks to suffer, is faltering. Eventually, the government facilitates JP Morgan’s purchase of Bear for $2 a share, and crisis is staved off for yet another day. Then Fannie Mae and Freddie Mac start running into trouble—trouble that, as much as it pains me to do so, I blame the Clinton Administration for—and the government saves them. Then Lehman happens, and the government doesn’t help, blaming the British government for Lehman’s failed merger with Barclays, and Lehman files for bankruptcy as AIG is fending off bigger and bigger collateral calls and realizes it won’t survive the week unless the taxpayers step in. But being privy to all the behind-the-scenes details—and Sorkin is really an amazingly meticulous reporter—still doesn’t elucidate why Lehman was allowed to collapse and AIG wasn’t. Sorkin tacitly ballyhooes the “Goldman Sachs conspiracy theories”—the idea that Treasury Secretary Henry Paulson, former CEO of Goldman Sachs, chose to let one of his old firm’s biggest competitors fail but saved AIG because the insurance giant owed Goldman many many millions of dollars—but despite all the anecdotes about how tired and despondent Paulson, Timothy Geithner, Ben Bernanke and the whole team were, we aren’t disabused of the conspiracies. There’s no real reason to be. Because Paulson signed an agreement when he became Treasury Secretary stating he wouldn’t do any business relating to Goldman for a whole year? Because he cashed out his Goldman stock before joining the Bush Administration? Because we’re just supposed to take it on faith that Those In Charge did everything they could possibly think of doing to save Lehman? As Matt Taibbi, arguably the best, most honest journalist working today, has repeatedly hammered home, these guys can say they tried everything because nobody except them really knows what that means. Even genuinely smart people who don’t work in finance struggle to comprehend the nature of collateralized debt obligations, credit-default swaps, short selling versus naked short selling and all the other financial tools/tactics that created this crisis in the first place. I’ve heard way too many pompous political science students claiming they “get it” because they Wikipedia’d a few terms to sound smart at parties, but they really don’t. I wonder if the bankers even get it, since their supposed financial brilliance completely blew up in their faces. So of course we’ve got to trust those people who say they can fix the problem, because they were the ones who created the problem in the first place, and hence are the only ones who have the best shot of defining what it is that really happened.
Needless to say, the story doesn’t begin with Bear Stearns but with the slow chipping away at Depression-era banking regulations, with the Clinton Administration’s ill-fated but good-hearted push to expand home ownership, with the proliferation of these too-big-to-fail giants because that’s what will apparently keep America competitive and the Chinese at bay. Sorkin doesn’t do a very good job at painting the big picture. The details of the rescues are fascinating in their own right, yes, but how did things even get to this point? From Sorkin’s book alone, we really have no idea—and we really, really need to know. You can picture Too Big to Fail being passed around on trading floors or among certain sets of curious academically-and-historically-minded Americans, but frankly, the book isn’t written to reach most people. Don’t get me wrong, I’m not implying he should have written a mass-market dumbed-down version of events just so more people would read it, but I am saying Sorkin’s book seems specifically targeted to “insiders.”
And not even political insiders. I was shocked at how briefly Sorkin covered Congressional deliberations over the $700 billion bailout of financial institutions. I suppose, when I picked up this book, that I imagined a longer version of that wonderful New Yorker piece, “Eight Days,” that chronicled the creation and passage of the Troubled Asset Relief Program (TARP) and all the infighting the package engendered. To say Sorkin gives the politicians short shrift is a huge understatement. They barely factor in at all. The focus remains on the CEOs and on Treasury officials, who expect Congress to just pass TARP and let them get on with the business of saving the world. And, of course, there are plenty of quotations from the finance guys implying that Congress just doesn’t understand the seriousness of the issue. Again, we come back to the same old bullshit: These bankers are smarter than everybody else, so we should just trust them—because we have no choice. It really borders on criminal. The book’s scenes involving members of Congress are few, and when they do appear, they include the familiar anecdotes about all the senators gulping in the face of potential apocalypse (oh no, we’ve got to do something or the world will come to an end!), Barney Frank ranting about fat-cat bankers, and John McCain suspending his campaign and how pissed off everybody was about that. An alien descending upon Earth to learn about these foreign creatures would, after reading this book, assume that Congress was not only peripheral, but looked upon with utter contempt by the people who really rule America. And Sorkin misses a grand opportunity to elucidate why this picture is so utterly fucked up.