Book—A Colossal Failure of Common Sense

A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers is an insider’s almost-ground-zero look at the collapse of Lehman Brothers. If you recall, Lehman Brothers was the fourth largest investment bank in Wall Street but went bankrupt at the height of the 2008-2009 global financial crisis. The author, Lawrence G. McDonald, who was a vice-president at the distressed debt trading department of Lehman, gave an detailed account of how, even when the subprime mortage derivatives market was going into a tailspin, the senior-most executives of Lehman were going on a real estate spending spree, getting rid of the most-capable managers, idiotically buying back the bank’s stocks even as the prices plummented, and over-leveraging the bank by 44 times.

This book is a real eye opener on the downfall of Lehman Brothers. Come to think of it, it would be a fine basis for a movie about Wall Street, better than Wall Street: Money Never Sleeps, starring Michael Douglas and Shia LaBeouf. I thought it was a waste of the Gecko character( from the 1987 original Wall Street movie).

On the other side—the government (regulator) side—you can’t go wrong reading Henry M. Paulson’s (He was the US Secretary of the Treasury at that time.) account of how and what the US Government did to avoid a meltdown of the global banking system—On the Brink: Inside the Race to Stop the Collapse of the Global Financial System.

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