Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe
Author: Gillian Tett
Publisher: Free Press
From Publishers Weekly
Starred Review. At once a gripping narrative, an education in derivatives, and a most lucid origin-story for the current financial meltdown, it's no surprise the author of this volume is an award-winning Financial Times journalist. Taking readers back to the invention of credit-derivative obligations (CDOs) at J. P. Morgan in 1994, and the subsequent exponential growth of that market, Tett (Saving the Sun) deploys a remarkable sense of pacing, generating real suspense over rapidly inflating debt on bank balance sheets; by the time Lehman Brothers fails, the book has become a bonafide page-turner. Tett explains how credit derivatives seemed a win-win for the financial world, freeing up capital, increasing profits, and diversifying risk, but makes the missteps equally clear as the industry hurtles toward a largely-unforeseen wave of loan defaults (the worst since the Great Depression). Interestingly, J.P. Morgan was one of a handful of banks sufficiently prescient to imagine this "perfect storm" of simultaneous defaults, and so never became over-reliant on CDOs. Ignoring the tacked-on, preachy epilogue (in which Tett advocates her specialty, social anthropology, as a way to avert future such crises), Tett's explosive, illuminating narrative is the one to read for anyone confused by the present financial mess.
From The Washington Post
From The Washington Post's Book World/washingtonpost.com Ever wonder, looking at your 401(k) account statement, what exactly happened last fall, when the financial system nearly collapsed and trillions of dollars of "wealth" evaporated? Gillian Tett's splendid book might be the explanatory tonic you've been looking for.
- Product Description:
- From award-winning Financial Times journalist Gillian Tett, who enraged Wall Street leaders with her newsbreaking warnings of a crisis more than a year ahead of the curve, Fool's Gold tells the astonishing unknown story at the heart of the 2008 meltdown.
Drawing on exclusive access to J.P. Morgan CEO Jamie Dimon and a tightly bonded team of bankers known on Wall Street as the "Morgan Mafia," as well as in-depth interviews with dozens of other key players, including Treasury Secretary Timothy Geithner, Tett brings to life in gripping detail how the Morgan team's bold ideas for a whole new kind of financial alchemy helped to ignite a revolution in banking, and how that revolution escalated wildly out of control.
The deeply reported and lively narrative takes readers behind the scenes, to the inner sanctums of elite finance and to the secretive reaches of what came to be known as the "shadow banking" world. The story begins with the intense Morgan brainstorming session in 1994 beside a pool in Boca Raton, where the team cooked up a dazzling new idea for the exotic financial product known as credit derivatives. That idea would rip around the banking world, catapult Morgan to the top of the turbocharged derivatives trade, and fuel an extraordinary banking boom that seemed to have unleashed banks from ages-old constraints of risk.
But when the Morgan team's derivatives dream collided with the housing boom, and was perverted -- through hubris, delusion, and sheer greed -- by titans of banking that included Citigroup, UBS, Deutsche Bank, and the thundering herd at Merrill Lynch -- even as J.P. Morgan itself stayed well away from the risky concoctions others were peddling -- catastrophe followed. Tett's access to Dimon and the J.P. Morgan leaders who so skillfully steered their bank away from the wild excesses of others sheds invaluable light not only on the untold story of how they engineered their bank's escape from carnage but also on how possible it was for the larger banking world, regulators, and rating agencies to have spotted, and heeded, the terrible risks of a meltdown.
A tale of blistering brilliance and willfully blind ambition, Fool's Gold is both a rare journey deep inside the arcane and wildly competitive world of high finance and a vital contribution to understanding how the worst economic crisis since the Great Depression was perpetrated.