Ford Library

Lewis, Michael. The big short : inside the doomsday machine. W. W. Norton, 2010.

Master storyteller Malcolm Gladwell calls Michael Lewis the finest storyteller of our generation. Moneyball and Liar’s Poker made him one of the best business journalists today. Among his recent successes is The Blind Side.

The Big Short is called the definitive book on the current recession. Having worked at Saloman Brothers in the 1980s, he provides an insider’s view of a perfect storm brewing. Lewis’ story revolves around several obscure Wall Street players who understood the housing market was built on a house of cards.

Although most people are left with the impact of the recession; Steve Eisman, an analyst at Oppenheimer and Co.; Greg Lippman a bond trader for Deutsche Bank; and Michael Burry, who left Stanford Medical School to manage his own hedge fund, acted upon an opportunity to make tremendous profits. (more…)

Andrews, Edmund L. Busted : life inside the great mortgage meltdown. W. W. Norton, 2009.

Busted is a personal and penetrating account of one man’s experience with purchasing an overpriced house with a subprime mortgage. Written by an economics reporter for the New York Times, the author is aware of the economic and financial risks, yet he succumbs to temptation and buys a house he cannot afford. With his judgment impaired by his emotions – he is in love – Andrews enters into a vortex of debt from credit cards and desperate refinancing on his home.

Andrews ends up ruined financially. He claims responsibility, but he also blames the mortgage brokers and real estate appraisers, money lenders and Wall Street players, credit rating agencies, institutional investors and Washington policymakers. Eventually he blames his ex-wife. One person he does not blame is his new wife. The Atlantic later reported that he failed to disclose Andrews’s new wife’s history of bankruptcy.

This is not a book with a happy ending. Yet this blunt tale of personal ruin is riveting and well worth the investment in time.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business.
All rights reserved.

Last night PBS aired a Frontline documentary on the cascade of financial catastrophe that begin with the rumors of Bear Stearns’ imminent failure and ended the passage of the $700 billion bailout plan. Producer/director Michael Kirk says, “How did it all go so bad so quickly? Who is responsible? How effective has the response from Washington and Wall Street been? Those are the questions at the heart of Inside the Meltdown“.

In addition to hosting the entire documentary for free on its web site, PBS also has additional interviews with Alan Greenberg, Paul Krugman, Sheila Bair, Martin Feldstein, and others.

When markets collide : investment strategies for the age of global economic change by Mohamed A. El-Erian. McGraw-Hill, 2008.

This book is about the fundamental changes that are occurring in global economic and financial systems. Existing financial infrastructures and systems are under pressure. Economic power is shifting from mature to emerging financial markets. Global growth is now influenced by former debtor nations that are building unforeseen wealth and facing unusual challenges. For investors, the transformation in the global economy has significant consequences.

Author El-Erian, CIO of PIMCO and former CEO of Harvard Management Company presents a diagnosis of the present financial turmoil and offers explicit investment advice to readers on how to exploit new opportunities and minimize exposure to changing patterns of risk.

El-Erian sees four trends: 1) Realignment in global growth 2) Return of inflation 3) Structured finance has diminished the barriers to entry 4) The transfer of wealth. He recommends that firms retool risk management and pay more attention to the middle and back-office activities that are less glamorous. He recommends that investors invest more internationally and less in the US.

This lucid explanation of the credit crisis won the 2008 Financial Times and the Goldman Sachs Business Book of the Year awards.

© Reviewer: Meg Trauner & Ford Library – Fuqua School of Business. All rights reserved.

Morris, Charles R. The trillion dollar meltdown : easy money, high rollers, and the great credit crash. Public Affairs, 2008.

Almost daily the Wall Street Journal reports on the deepening credit crisis. Today, the front page includes a depressing story about bad loans, excessive risk taking and the need for large capital infusions. A year ago, consumer spending was strong, the market for investment grade credit was growing and the S&P 500 jumped 9% in three months. What happened?

According to financial writer, investment banker and lawyer Charles P. Morris, we are experiencing the result of a reckless financial environment — twenty five years of free and unregulated financial markets. In the Trillion Dollar Meltdown, Morris provides a brief history of financial markets beginning with the Reagan era. He also discusses financial instruments, why they were developed and how they now contribute to the problem of leverage in our economy — instruments such as CMOs, CSOs and SIVs.
(more…)