{"product_id":"a-colossal-failure-of-common-sense-isbn-9780307588340","title":"A Colossal Failure of Common Sense","description":"\u003cb\u003eOne of the biggest questions of the financial crisis has not been answered until  now: What happened at Lehman Brothers and why was it allowed to fail, with aftershocks  that rocked the global economy? In this news-making, often astonishing book, a former  Lehman Brothers Vice President gives us the straight answers—right from the belly  of the beast.\u003c\/b\u003e\u003cbr\u003e\u003cbr\u003e In \u003ci\u003eA Colossal Failure of Common Sense\u003c\/i\u003e, Larry McDonald, a Wall Street  insider, reveals, the culture and unspoken rules of the game like no book has ever  done. The book is couched in the very human story of Larry McDonald’s Horatio Alger-like  rise from a Massachusetts “gateway to nowhere” housing project to the New York headquarters  of Lehman Brothers, home of one of the world’s toughest trading floors.\u003cbr\u003e  \u003cbr\u003e We get  a close-up view of the participants in the Lehman collapse, especially those who  saw it coming with a helpless, angry certainty. We meet the Brahmins at the top,  whose reckless, pedal-to-the-floor addiction to growth finally demolished the nation’ s oldest investment bank. The Wall Street we encounter here is a ruthless place,  where brilliance, arrogance, ambition, greed, capacity for relentless toil, and other  human traits combine in a potent mix that sometimes fuels prosperity but occasionally  destroys it.\u003cbr\u003e  \u003cbr\u003e The full significance of the dissolution of Lehman Brothers remains  to be measured. But this much is certain: it was a devastating blow to America’s—and  the world’s—financial system. And it need not have happened. This is the story of  why it did.“...gives the readers a visceral sense of what it was like to work at Lehman Brothers  and the fateful decisions and events that led to the company’s death spiral...” \u003cbr\u003e—Michiko  Kakutani, \u003ci\u003eThe New York Times\u003c\/i\u003e\u003cbr\u003e\u003cbr\u003e“Highly readable…\u003ci\u003eA Colossal Failure of Common Sense\u003c\/i\u003e largely rings true. It expresses the anger that many former Lehman employees still feel toward Mr. Fuld. And it convincingly characterizes the investment bank as a house divided against itself, between the bears who had foreseen bubbles and the bulls who wrongly believed that this time was different.”\u003cbr\u003e\u003ci\u003e—The Economist\u003c\/i\u003e\u003cbr\u003e\u003cbr\u003e “... describes a CEO ­acting as if his firm was too  big to fail.”\u003cbr\u003e\u003ci\u003e —Wall Street Journal \u003c\/i\u003e\u003cbr\u003e\u003cbr\u003e “...poignantly told...from an insider [who]  witnessed, often in amazement and disgust, the corporate dysfunction and hubristic  leadership that led to [Lehman’s] demise.”\u003cbr\u003e\u003ci\u003e —BusinessWeek\u003c\/i\u003e\u003cbr\u003e\u003cbr\u003e “...engaging and even funny.” \u003cbr\u003e\u003ci\u003e —Fortune\u003cbr\u003e\u003c\/i\u003eLAWRENCE G. McDONALD is a managing director of Pangea Capital Management LP. He was, until 2008, vice president of distressed debt and convertible securities trading at Lehman Brothers. He ran an extremely successful joint venture between the firm’s fixed income and equity divisions and was one of Lehman’s most consistently profitable traders. McDonald is also cofounder of Convertbond.com, named by Forbes magazine as “Best of the Web” from 2000 to 2003, specifically citing it as the Web’s premier source for convertible securities information, valuation, and news.\u003cbr\u003e \u003cbr\u003ePATRICK ROBINSON wrote\u003ci\u003e Lone Survivor\u003c\/i\u003e with the U.S. Navy SEAL Marcus Luttrell.\u003cb\u003ePrologue \u003c\/b\u003e\u003cbr\u003e  \u003cbr\u003e I still live just a few city blocks away from the old Lehman Brothers headquarters at 745 Seventh Avenue—six blocks, and about ten thousand years. I still walk past it two or three times a week, and each time I try to look forward, south toward Wall Street. And I always resolve to keep walking, glancing neither left nor right, locking out the memories. But I always stop. \u003cbr\u003e  \u003cbr\u003e And I see again the light blue livery of Barclays Capital, which represents—for me, at least—the flag of an impostor, a pale substitute for the swashbuckling banner that for 158 years was slashed above the entrance to the greatest merchant bank Wall Street ever knew: Lehman Brothers. \u003cbr\u003e  \u003cbr\u003e It was only the fourth largest. But its traditions were those of a banking warrior—the brilliant finance house that had backed, encouraged, and made possible the retail giants Gimbel Brothers, F. W. Woolworth, and Macy’s, and the airlines American, National, TWA, and Pan American. They raised the capital for Campbell Soup Company, the Jewel Tea Company, B. F. Goodrich. And they backed the birth of television at RCA, plus the Hollywood studios RKO, Paramount, and 20th Century Fox. They found the money for the Trans-Canada oil pipeline. \u003cbr\u003e  \u003cbr\u003e I suppose, in a sense, I had seen only its demise, the four-year death rattle of twenty-first-century finance, which ended on September 15, 2008. Yet in my mind, I remember the great days. And as I come to a halt outside the building, I know too that in the next few moments I will be engulfed by sadness. But I always stop. \u003cbr\u003e  \u003cbr\u003e And I always stare up at the third floor, where once I worked as a trader on one of the toughest trading floors on earth. And then I find myself counting all the way up to thirty-one, the floor where it all went so catastrophically wrong, the floor that housed the royal court of King Richard. That’s Richard S. Fuld, chairman and CEO. \u003cbr\u003e  \u003cbr\u003e Swamped by nostalgia, edged as we all are by a lingering anger, and still plagued by unanswerable questions, I stand and stare upward, sorrowful beyond reason, and trapped by the twin words of those possessed of flawless hindsight: if only. \u003cbr\u003e  \u003cbr\u003e Sometimes I lie awake at night trying to place all the if-onlys in some kind of order. Sometimes the order changes, and sometimes there is a new leader, one single aspect of the Lehman collapse that stands out above all others. But it’s never clear. Except when I stand right here and look up at the great glass fortress which once housed Lehman, and focus on that thirty-first floor. Then it’s clear. Boy, is it ever clear. And the phrase if only slams into my brain. \u003cbr\u003e  \u003cbr\u003e If only they had listened—Dick Fuld and his president, Joe Gregory. Three times they were hit with the irredeemable logic of three of the cleverest financial brains on Wall Street—those of Mike Gelband, our global head of fixed income, Alex Kirk, global head of distressed trading research and sales, and Larry McCarthy, head of distressed-bond trading. \u003cbr\u003e  \u003cbr\u003e Each and every one of them laid it out, from way back in 2005, that the real estate market was living on borrowed time and that Lehman Brothers was headed directly for the biggest subprime iceberg ever seen, and with the wrong men on the bridge. Dick and Joe turned their backs all three times. It was probably the worst triple since St. Peter denied Christ. \u003cbr\u003e  \u003cbr\u003e Beyond that, there were six more if-onlys, each one as cringemakingly awful as the last. \u003cbr\u003e  \u003cbr\u003e If only Chairman Fuld had kept his ear close to the ground on the inner workings of his firm—both its triumphs and its mistakes. If he had listened to his generals, met people who formed the heart and soul of Lehman Brothers, the catastrophe might have been avoided. But instead of this, he secluded himself in his palatial offices up there on the thirty-first floor, remote from the action, dreaming only of accelerating growth, nursing ambitions far removed from reality. \u003cbr\u003e  \u003cbr\u003e If only the secret coup against Fuld and Gregory had taken place months before that clandestine meeting in June 2008. If the eleven managing directors who sat in ostensibly treasonous but ultimately loyal comradeship that night had acted sooner and removed the Lehman leaders, they might have steadied the ship, changing its course. \u003cbr\u003e  \u003cbr\u003e If only the reign of terror that drove out the most brilliant of Lehman’s traders and risk takers had been halted earlier, perhaps in the name of common sense. The top managers might have marshaled their forces immediately when they saw giants such as Mike Gelband being ignored. \u003cbr\u003e  \u003cbr\u003e If only Dick Fuld had kept his anger, resentment, and rudeness under control. Especially at that private dinner in the spring of 2008 with Hank Paulson, secretary of the United States Treasury. That was when Fuld’s years of smoldering envy of Goldman Sachs came cascading to the surface and caused Paulson to leave furious that the Lehman boss had disrespected the office he held. Perhaps that was the moment Hank decided he could not bring himself to bail out the bank controlled by Richard S. Fuld. \u003cbr\u003e  \u003cbr\u003e If only President George W. Bush had taken the final, desperate call from Fuld’s office, a call made by his own cousin, George Walker IV, in the night hours before the bank filed for Chapter 11 bankruptcy. It might have made a difference. \u003cbr\u003e  \u003cbr\u003e If only . . . if only. Those two words haunt my dreams. I go back to the fall of Lehman, and what might have made things different. For most people, victims or not of this worldwide collapse of the financial markets, it will be, in time, just water over the dam. But it will never be that for me, and my long background as a trader and researcher has prompted me many times to burrow down further to the bedrock, the cause of the crash of 2008. I refer to the repeal of the Glass-Steagall Act in 1999. \u003cbr\u003e  \u003cbr\u003e If only President Clinton had never signed the bill repealing Glass-Steagall. Personally, I never thought he much wanted to sign it, but to understand the ramifications it is necessary to delve deeper, and before I begin my story, I will present you with some critical background information, without which your grasp might be incomplete. It’s a ten-minute meadow of wisdom and hindsight, the sort of thing I tend to specialize in. \u003cbr\u003e  \u003cbr\u003e The story begins in the heady, formative years of the Clinton presidency on a rose-colored quest to change the world, to help the poor, and ended in the poisonous heartland of world financial disaster. \u003cbr\u003e   \u003cbr\u003e Roberta Achtenberg, the daughter of a Russian-born owner of a Los Angeles neighborhood grocery store, was plucked by President Clinton from relative obscurity in 1993 and elevated to the position of assistant secretary of the Department of Housing and Urban Development. Roberta and Bill were united in their desire to increase home ownership in poor and minority communities. \u003cbr\u003e  \u003cbr\u003e And despite a barrage of objections led by Senator Jesse Helms, who referred to Achtenberg as that “damn lesbian,” the lady took up her appointment in the new administration, citing innate racism as one of the main reasons why banks were reluctant to lend to those without funds. \u003cbr\u003e  \u003cbr\u003e In the ensuing couple of years, Roberta Achtenberg harnessed all of the formidable energy on the massed ranks of United States bankers, sometimes threatening, sometimes berating, sometimes bullying—anything to persuade the banks to provide mortgages to people who might not have been up to the challenge of coping with upfront down payments and regular monthly payments. \u003cbr\u003e  \u003cbr\u003e Between 1993 and 1999, more than two million such clients became new homeowners. In her two-year tenure as assistant secretary, she set up a national grid of offices staffed by attorneys and investigators. Their principal aim was to enforce the laws against the banks, the laws that dealt with discrimination. Some of the fines leveled at banks ran into the millions, to drive home Achtenberg’s avowed intent to utilize the law to change the ethos of providing mortgage money in the United States of America. \u003cbr\u003e  \u003cbr\u003e Banks were compelled to jump into line, and soon they were making thousands of loans without any cash-down deposits whatsoever, an unprecedented situation. Mortgage officers inside the banks were forced to bend or break their own rules in order to achieve a good Community Reinvestment Act rating, which would please the administration by demonstrating generosity to underprivileged borrowers even if they might default. Easy mortgages were the invention of Bill Clinton’s Democrats. \u003cbr\u003e  \u003cbr\u003e However, there was, in the mid- to late 1990s, one enormous advantage: amid general prosperity, the housing market was strong and prices were rising steadily. At that point in time, mortgage defaults were relatively few in number and the securitization of mortgages, which had such disastrous consequences during the financial crisis that began in 2007, barely existed.Number-One New York Times Bestselling Coauthor of Lone Survivor","brand":"Crown Currency","offers":[{"title":"Default Title","offer_id":46301108928741,"sku":"NP9780307588340","price":22.0,"currency_code":"USD","in_stock":false}],"thumbnail_url":"\/\/cdn.shopify.com\/s\/files\/1\/1842\/7735\/files\/9780307588340.jpg?v=1767720371","url":"https:\/\/k12savings.com\/products\/a-colossal-failure-of-common-sense-isbn-9780307588340","provider":"K12savings","version":"1.0","type":"link"}