It’s worth remembering at this point that it was Gretchen Morgenson, followed closely by Pittman, who first uncovered the story about Goldman’s interest in the AIG bailout back in September 2008. In a sense, the rest of the business press has been following them ever since, acting as though the information had popped up out of a toaster.
I would go so far as to say that despite the quote at the top of this story, TBTF doesn’t even deliver many warts. The catty zingers, embarrassing screw-ups, and devious maneuvers are surprisingly few and far between, though Lehman’s number two, Joe Gregory, does take it on the chin more than once.
The biggest problem, of course, is not the shortage of dirt. It is that the book requires readers to forget that virtually all of the institutions cited, not to mention several of the individuals barking out forceful commands, played key roles in causing the very crisis they are shown here seeking to ameliorate.
To say that this book suffers from its narrow focus is a wild understatement. History here begins with the collapse of Bear Stearns in the spring of 2008 and ends with the collapse of Lehman Brothers in the fall. Everybody’s scrambling, but it’s never clear exactly what caused the problems in the first place.
A Martian reading TBTF would have no inkling that Fuld, Paulson, Citigroup, and the like were essentially cleaning up their own mess. This creates a sense of disconnect you can drive a Town Car through. Take this scene at a 2008 dinner for the G7 Summit in Washington, in which Paulson shares his anxieties about leverage with Fuld:
“I’m worried about a lot of things,” Paulson now told Fuld, singling out a new IMF report estimating that mortgage-and real-estate related writedowns could total $945 billion in the next two years. He said he was also anxious about the staggering amount of leverage—the amount of debt to equity—that the investment banks were still using to juice their returns. That only added enormous risk to the system, he complained.
But it was Goldman, with Paulson at the helm, that strenuously lobbied for looser capital requirements in 2004, unleashing the sort of leverage that Paulson is seen fretting about. And it was Paulson’s Goldman (as Pittman’s reporting revealed back in 2007) that did more than its share to create the defective securities that are seen melting down in TBTF. Sorkin explains none of this.
As for Fuld, surely some passing mention of Lehman’s role in fueling predatory lending and toxic underwriting would have helped readers put the madcap events of 2008 in context. It was the Times itself, after all, that revealed how deeply intertwined Lehman was in predatory lending with a seminal 2000 exposé by Diana Henriques and Lowell Bergman, work that was amplified by other reporters, including The Wall Street Journal’s Mike Hudson in 2007. Lehman’s (and Wall Street’s) neck-deep involvement in subprime is hardly a secret at this point.
And it’s not only backstory that gets tossed off the private plane. An exposé by The Wall Street Journal in October 2008 made a devastating case that in the weeks before the fall—which is to say, right in the middle of Sorkin’s timeline—Fuld and his team had grossly misrepresented Lehman’s financial position. Do we get any hint of this from TBTF? No. Instead, we are offered a glance at Fuld’s morale-building techniques:
To encourage teamwork, he adopted a point system similar to the one that he used to reward his son, Richie, when he played hockey. Fuld taped his son’s game and would inform him: “You get one point for a goal, but two points for an assist.”
Fuld clearly cooperated fully for this book. As it happens, he is the only figure whose motives are explicitly characterized—as someone who is “driven less by greed than by an overpowering desire to preserve the firm he loved.”
To some degree, TBTF suffers from what I call the Avatar problem. In the movie, a youthful outsider immerses himself in an exotic culture of larger-than-life figures, and ultimately begins to see things from their point of view. Indeed, he winds up riding the big red Banshee.