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
Gillian Tett, Author Free Press $26 (293p) ISBN 978-1-4165-9857-2
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.
SAVING THE SUN: A Wall Street Gamble to Rescue Japan from Its Trillion-Dollar Meltdown
Financial journalist Tett asks why the economic engine that achieved phenomenal growth for Japan between 1953 and 1970 has been stalled since 1990, with 2003 marking the fifth consecutive year of Continue reading »