Posted by mossmjac

Inside the skins of the Wall Street crisis players

Written by Andrew Ross Sorkin & Eric Lam, Financial Post  


Since Lehman Brothers went kaput in September 2008, hundreds of books have popped up trying to analyze, deconstruct and explain just what happened during the financial crisis. But one of those books, Too Big to Fail, is decidedly different.

Instead of writing a dry, academic analysis, author Andrew Ross Sorkin, a New York Times business columnist, set out to write a page-turner focused on the characters at the centre of all the drama: their quirks, their foibles, their humanity.

"There are all of these different components [to the crisis] and what connects them are not the institutions and money, but the people," Mr. Sorkin said in an interview this week at a downtown Toronto hotel.

"When you get inside the room, your field of vision changes, and I thought this would help us understand the crisis better."

That message extends to the book's title, which his publisher disliked. However, the phrase has since become a catchphrase for the arrogance of Wall Street, fitting for a book about hubris more than anything else.

"We have created institutions that truly are too big to fail. But more importantly, we've created a generation of people -- and this is what I think led to the crisis more than anything else -- who thought they were too big to fail," he said.

Mr. Sorkin signed his book deal at the height of the financial crisis in October 2008, while many critical events were still playing out. He plans to add some new information and analysis for the paperback edition in the fall, but argues even now there is not enough breathing space to figure out the true place of the crisis in history.

"Here we are a year-and-a-half later, it's really hard to argue that anyone has the proper perspective to truly evaluate what took place," he said. "There are plenty of people who've already written books and articles with specific judgments, and they will either be wrong or extremely lucky to be right."

Letting the reader come to his or her own conclusions was a guiding principle while writing the book. He wanted readers to approach central characters such as Lehman chief executive Richard Fuld or U.S. Treasury Secretary Henry Paulson without any preconceived notions or "good and bad guy" labels.

He learned that lesson researching Mr. Paulson, who can appear stiff and awkward on television.

Mr. Sorkin worried about framing the book around such an important, but possibly dull character. Instead, he found the former Goldman Sachs chief executive to be a fascinating and complex subject. A staunch capitalist and a Republican on the one hand, Mr. Paulson is also an ardent environmentalist who drives a Prius and married a Democrat. His mother reportedly cried when she found out he was going to work for the Bush administration.

"I think in the end, history will judge him more favour-ably than it has thus far," Mr. Sorkin said. "He's somebody who unfortunately helped lead us to the brink, but he also led us away from the brink. By the time he took the job, were the seeds for this debacle already sown?"

Some, such as Erin Callan, the former chief financial officer for Lehman, were guilty of being in the wrong place at the wrong time. But Mr. Sorkin's opinion of her boss, Mr. Fuld, is harsher.

"He was somebody who really loved the firm, but he almost loved it blindly. He had loyalties to people he shouldn't have had. This was a situation he created, and he struggled to let go at the end," he said.

Mr. Sorkin, who has sparred with comedian Jon Stewart on the Daily Show, said public anger has really swelled as surviving companies such as Goldman return to profit.

This is important, as long as the anger results in meaningful reform instead of satisfying the need to "tar and feather" the bigwigs on Wall Street, he said.

What really frustrated Mr. Sorkin was the habit of many of his subjects, at least initially, to refuse to accept responsibility.

"Many of them felt they were in the same boat, it was a perfect storm, everyone's to blame but not me," he said. "They would talk about themselves like they were cancer survivors or something."

Even so, he refuses to buy into the notion that executives were so out of touch they would be influenced by the moral hazard argument -- taking great risks because the government would be there to bail them out.

"I don't think in reality any of these people ever said to themselves, 'Let's throw caution to the wind, because if I drive my company into the ground we'll be saved,'" Mr. Sorkin said.

erlam@nationalpost.com