A House Of Cards indeed,
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This review is from: House of Cards: How Wall Street's Gamblers Broke Capitalism (Paperback)
This is the third book by William D. Cohan I have read. The other two were Money and Power: How Goldman Sachs Came to Rule the World and The Secret History of Lazard Freres & Co. If I had to choose between the three of them I would say that House of Cards is the best. The other two books are more descriptive in nature, whereas the pace of House of Cards is much faster as the narrative is almost entirely driven by quotes of the people involved. I think that is an excellent way in telling the story of Bear Stearns (I won't abbreviate it as BS because that often means something else).
The book comes in three parts with Part One telling the last week of the bank and its take-over by JP Morgan. The assertion by one of the senior Bear Stearns people that the bank was done in by malicious rumours made me smile because every other banker will try to convince you that he is the angel and all the others are the culprits.
Part Two tells the history of Bear Stearns from its beginnings in 1923 to about 2001. Cohan does so by spending a lot of time on three people who drove the bank's development from beginning to the end. I won't recount more details here because others have done so but as I read it I felt that the seeds of Bear Stearns' bankruptcy were planted in the mid- to late 1980s. This part also covers a fair bit of the demise of Long-Term Capital Management. If you want to know everything about this affair Cohan suggests that you should read When Genius Failed: The Rise and Fall of Long Term Capital Management because it covers the affair quite well.
Part Three deals with the events which led to the bankruptcy of Bear Stearns. This was aided by the criminal behaviour of the two guys who ran the hedge funds - and if you want my opinion they should be hung from the next lamp post - as much as aloof senior management and the fact that Bear Stearns found itself at the wrong end of the market. I know that the investment choices of the likes of Lehman and Merrill Lynch were just as bad, but some other banks and funds came out quite well.
The Epilogue deals with the day after and the Lehman and Merrill cases. There is also quite a bit on what the senior Bear Stearns people are doing at the time of writing (2009). Cohan also asks if there will be similar crisis in future and his answer is a definite `Yes' and I would agree. If in doubt, I suggest you read This Time Is Different: Eight Centuries of Financial Folly to find out how well the financial world has performed on this account in the last eight centuries.
Someone here complained that Cohan uses too much financial jargon. Yes, it does help if you know your basic credit terms. If you don't, you should perhaps read The Big Short: Inside the Doomsday Machine because it explains quite thoroughly the meaning of the terms used and the basic concepts behind it.
All told I love Cohan's way of telling the story, his sense of humour and the suspense he manages to build up and hold to the end of the book. This is definitely a page turner.