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on 18 December 2013
This book analyzes the worldwide financial crisis of the first decade of the 21st century from the point of view of one of the major market participants who created and sold complex financial products, J.P. Morgan.

The elite and its ideology
As G. Tett rightly states, `in most societies, elites try to maintain their power not simply by garnering wealth, but by dominating the mainstream ideologies.' The ideology of the financial elite is `free markets'. Their gospel pretends `that market prices are always right' and that `markets can correct excess far better than any government.' This gospel was translated in deregulation (repeal of Glass-Steagall), in poor bank and mortgage regulations and also, importantly, in accountancy rules, like `mark-to-market.'

The magic formula: leverage
Monstrous leverage means `potential' monstrous returns (unfortunately, also negative ones) and potential monstrous bonuses for the top management.
But, how to create monstrous leverage in banks where the capital/asset ratio is limited? First, by creating new products like derivatives - CDSs (credit default swaps) and CDOs (collateral debt obligations) based on all sorts of credits and mortgages; secondly, by putting these products in off-shore and off-balance vehicles, like SIVs (Structured Investment Vehicles); thirdly, by financing long term loans with short term debt.
The Fed chairman was against the regulation of derivatives because he believed that they made markets more efficient. A maestro stroke.

Profit hunger
All over the world, banks could not get enough of CDOs and their fat profit margins. But, the number of households that could afford prime mortgages was limited. No problem, give those who can't afford it, `sub prime' mortgages and give every new CDO a slice of them as long as they can get a triple A rating from the rating agencies. The reasoning behind it was that the US housing market would in any case not go down.
When the holders of sub prime debt could not reimburse their loan anymore, the CDO market simply imploded. (Most) Banks were confronted with heavy losses. All became suspicious (where are the losses sitting?) and refused to lend cash balances to one another. Lehman Brothers went bankrupt. The government (the taxpayer) had to step in massively. `The altar of free-market ideals was ripped apart.'

No basic fairness
Millions of ordinary families have suffered shattering financial blows. On the other hand, the fat bonus regime for the top management came back, but only because governments stand firmly behind the financial system, although it is still, for most part, in private-sector hands.
This situation is `totally inconsistent with any vision of market capitalism and basic fairness. While taxpayers were (and are) shouldering the risks, bankers and bank shareholders were (are) receiving most of the gains.'

This book is a very worthwhile read.
One of the best books on the financial crisis is `The Big Short' by Michael Lewis with its perfect summary: free money for the capitalists, free markets for everyone else.
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on 4 April 2017
Oh dear, oh dear, what a mess! I lived through this period of history and now read a fantastic account of what was happening. It’s now 2017, so we’re looking at ten years on, and I’m not sure if any of the lessons of this crisis have been truly learned. It seems the problem has been ‘parked’ out of view on the taxpayers, to be paid down over generations, while banking continues to do as it wants. I came to this book having read John Kay’s ‘Other People’s Money’ and Owen Jones’s ‘The Establishment’. In particular, you can’t help asking Kay’s question: ‘What’s it all for?’ Gillian Tett does give a great and detailed account of the period, and without bias. I think given the complexity of the finance involved she goes a great job in breaking this down and making it accessible.
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on 2 December 2015
Really well researched for a journalist, shows excellent access to sector contacts and expertise. A little technical at times but quite readable and understandable. Best read in conjunction with the many books related to specific banking disasters in the crash, also alongside books from politicians - although as they match up only in parts it can be hard to separate perceptions from reality to get the story straight. Watch a few films on the crash too. It all makes sense eventually and this book is one of the most useful insights to the banking issues operating throughout.
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on 14 November 2017
Fact-filled, but not at the expense of telling a good story. I'd love an updated version to bring the story up to date in light of events since 2010. GT's book is up there with Michael Lewis's work (the master of the populist financial genre), Liar's Poker, The Big Short, Boomerng etc.
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on 17 February 2013
This book explains clearly how the financial problems began and mushroomed, with copious anecdotes, quotes and references for the reader to look into further if required. The fact that the book remains published and available suggests that the truth of the content is not disputed.

This is scary stuff, which regulatory authorities were clearly not able to identify and constrain. Those same authorities, together with national governments, economists and politicians, are still tip-toeing around the problems and causes now. They appear unable or unwilling to removing or ringfencing the environment within which this greedy group of bankers mader obscene profits to the considerable and long term detriment of most others. I despair . . . .
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on 29 September 2015
I found this a hard book to keep reading so had to make an effort to keep coming back to it.
However I think that is more a matter of me struggling to understand some of the complexities rather than the authors fault.
The author is a familiar guru on our TV's whenever a rational explanation is needed to a complex financial issue and I am a great fan of her lay friendly explanation in live interviews but in written text I found it sometimes overwhelmingly complicated.
Anyway I persevered and am considerably better informed as the result of this book.
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on 8 January 2013
I love the approach; by giving me the development of the financial tools that brought the world economy to its knees, Gillian Tett gave me the feeling that I was inside looking out. However, the book is best read in conjunction with Nicholas Shaxson's Treasure Islands - hence the four stars. Without the off-shore world the Bank of England helped to create non of the financial institutions involved in making money out of the various financial tools developed during the last two decades of the 20th century could have created the amount of money that they did. This book is great in explaining the how and its drawbacks - not to mention the lack of due diligence that crept in as everybody scrambled for more. A must read.
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on 16 September 2015
Not a newly published book but for anyone who takes an interest in why, in the UK, we are in the financial mess we are in and shares a skepticism regarding the official view, but finds the vocabulary of the banks and global markets gobblydegook then this book opens up the mysteries of: futures; swaps; derivitaves and the likes in a readable way for the layperson.
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on 19 May 2015
This is a remarkable insight into the events that resulted in the 2008 crisis and the extent that politicians and the regulation authorities ignored the warnings. It is a sober comment on over reliance on self regulation especially in an environment of little understood use of technology and tactics to create massive profits – and losses. Reading this book gives the feeling of an unfolding detective novel. Gripping and shocking. What will happen next and why has so little changed? I hope she will never have to write a sequel, but I confess that I fear that probability is being ignored.
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on 18 December 2011
In 1994, J.P. Morgan, looking to create a market for credit derivatives, provided $4.8 billion of credit to Exxon and sold the credit risk to the European Bank of Reconstruction and Development. Thus, the modern Credit Default Swap was born. Gillian Tett's "Fool's Gold" traces the history of credit derivatives through the lives of the bankers at J.P. Morgan who created them and ends with their incredible destruction of financial markets in 2008.

"Fool's Gold" is divided in three parts entitled- Innovation, Perversion and Disaster. "Innovation" follows the J.P. Morgan team's attempts to purposely create new credit derivatives in 1994, convince regulators to allow them to exist and find a viable way to industrialize their production. "Perversion" follows the explosion of derivative operations in other banks through quasi-shell companies, the development of new derivatives (such as those linked to the sub-prime mortgage market) and the extent to which banks leveraged themselves to produce them. "Disaster" gives another account of the financial crisis through the perspective of JPMorgan.

"Fool's Gold" provides a detailed account of the history behind the financial instruments which ultimately brought the financial system to a halt in 2008 whilst simultaneously detailing the development of J.P. Morgan through 1994-2009 throughout its acquisitions and takeovers. It's well-written and does a fairly good job of explaining complex financial terms (although those new to finance might still struggle.) However, those wanting a more detailed explanation of the financial crisis itself or the sub-prime market might be disappointed as Tett's account is somewhat rushed.
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