Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System—and Themselves
By Andrew Ross Sorkin | Viking | 600 pages, $32.95
“I must admit,” Sorkin wrote us this morning, “I was completely bowled over by the turnout. It was quite incredible to reassemble so many characters from the book in one room all together. For a book that shows so many of these characters with their warts and all in the midst of the greatest panic of their lives, I am tremendously grateful that they came out to support me.”— “Andrew Ross Sorkin’s Book Party Was Filled With CEOs, Warts and All,” New York magazine’s Daily Intel blog, an item on a book party for Too Big To Fail at the Monkey Bar, October 21, 2009
Andrew Ross Sorkin’s Too Big To Fail is an extraordinary work of reportage by a once-in-a-generation journalist. It is also something else: an example of access journalism par excellence. That’s not a flaw, necessarily, but it is a fact that colors nearly every paragraph of this sprawling book. As such, Too Big To Fail demonstrates both the potential and the limits of the form.
Anyone who finds TBTF less than satisfying as a work of nonfiction, and I’m among them, must first acknowledge that this book places vast amounts of new information into the public record, information that probably only Sorkin could have gathered in such quantity. When it comes to fact-gathering virtuosity, TBTF is in a class by itself. What’s more, the facts have held up. What more do you want from a journalist? It is a fair question.
A thirty-two-year-old New York Times columnist and editor, Sorkin burst onto the scene earlier in the decade via a series of blockbuster scoops on mergers and acquisitions. He followed that up with the creation of DealBook, a franchise within a franchise at the Times that breaks and aggregates financial news, amassing more than 200,000 loyal e-mail subscribers and many more regular readers.
For his first book, Sorkin and his team interviewed more than two hundred people, gathering anecdotes on most of the key players in the financial crisis: Paulson, Bernanke, Geithner, Fuld, Blankfein, Dimon (especially Dimon), and many more. The scenes are woven deftly together with previously reported and properly attributed material to form a streamlined chronology of the months leading up to Lehman’s failure and AIG’s rescue, as viewed from the executive suite. An instant best-seller, Sorkin’s is the breakout book of the crisis. Early reviews in the financial press start at euphoric and go up from there. And there’s a reason for that.
Without TBTF there would be many things we did not know. Who, for example, leaked the June 4, 2008, story about Lehman’s last-ditch talks with a Korean government entity, imperiling a deal that could have been a critical lifeline? (Sorkin says Lehman brass believe it was Erin Callan, the company’s CFO.) What does financial Armageddon look like? (Sorkin provides a deadly snapshot: “The Lehman board had already begun its meeting when the bankruptcy lawyers from Weil Gotshal, towing wheeled suitcases stuffed with documents, finally arrived.”) And what did Goldman CEO Lloyd Blankfein say during a critical meeting at the New York Fed, on the very day the government decided to bail out AIG, sending billions of dollars to his own company? (“So, when is the money going to be paid out?”)
(Disclosure time: Goldman gave the business-press section I run at the Columbia Journalism Review, known as The Audit, $25,000 last year. Sorkin was a big help in creating The Audit as one of several advisers to cjr before I arrived in the spring of 2007, and has since attended private breakfasts of funders and journalists hosted by The Audit to discuss journalism and financial issues. End of disclosure. Void where prohibited. See box top for details.)
The book even includes glimpses into the thoughts of various big shots. Want to know what Tim Geithner was thinking during a particularly tense 6 a.m. jog along the river in lower Manhattan?
This is what it was all about, he thought to himself, the people who rise at dawn to get in to their jobs, all of whom rely to some extent on the financial industry to help power the economy. Never mind the staggering numbers. Never mind the ruthless complexity of structured finance and derivatives, nor the million-dollar bonuses of those who made bad bets. This is what the saving the financial industry is really about, he reminded himself, protecting ordinary people with ordinary jobs.
Okay, so not all anecdotes are created equal. And yes, the book is packed with selective accounts of media-savvy individuals bent on preserving their reputations—no surprise, in a work that relies so heavily on access to private conversations and thoughts.
The book’s ultimate value is the window it provides into how leading figures of the financial system behaved under the pressure of the greatest professional crisis of their lives, and the role played by ego and face-saving during those historic times. We knew that things in the final months were chaotic and out of control. What Sorkin illustrates, and in vivid journalistic detail, is the madcap confusion as frantic government officials try to engineer one merger after another between longstanding rivals while trying to avoid the appearance of doing just that. This leads to some real voyeuristic pleasures. In one memorable passage, Geithner plays matchmaker with Lehman’s Dick Fuld and Barclay’s Bob Diamond:
“He knows you’ll be calling,” Geithner assured [Fuld]. “I understand I’m supposed to call you,” Fuld said when he later reached Diamond. Diamond, however, was clearly flustered, as he thought he had been explicit with Geithner that he didn’t want to talk directly to Fuld about a deal. A deal would have to be brokered by the U.S. government. “I think we should talk,” Fuld said, trying to engage with him. “I don’t see an opportunity for us here,” Diamond answered.
Such scenes, which evoke Harold Pinter or maybe Abbott and Costello, are thick on the ground in TBTF. They are its reason for being.
What readers should not expect is an exploration of the roots of the financial crisis, primers on synthetic collateralized debt obligations, ruminations on the nature of greed, muckraking, moralizing, or thumbsucking of any kind. Any historical context here exists simply to get readers to the next tense conversation in the next glamorous location (the St. Regis, Sun Valley, Dick Fuld’s limo, and so on).
When Sorkin does take a step back from his fly-on-the-wall reportage, his analysis and conclusions are unoriginal and middle of the road. The prose is pure newspaper-ese (“Wearing one of his trademark off-the-rack, no-fuss suits and tortoise-rimmed glasses, Buffett. . . .”). There are no characters to speak of. The protagonists are mostly stick figures, square-jawed types running around with their hair on fire, uttering dialogue straight out of an action movie. Three specimens should give you the idea:
McGee shot a nervous glance at McDade, as if to say, “We’re fucked.”
For fuck’s sake, Wilkinson thought.
“Why didn’t we know this earlier? This is fucking crazy.”
Basically, TBTF is the 24 of financial-crisis books. The world is about to blow up, and everybody is Jack Bauer. Interestingly, the only figure to emerge with at least a shred of personality is Dick Fuld. Sorkin has assembled so much material on the Lehman lifer that the reader is able to witness the unraveling of his personality as months of stress and sleepless nights take their toll. After a while, the only person who doesn’t know he’s finished as CEO of Lehman is Fuld himself. This, Sorkin makes clear, is a man who has sat through one too many conference calls:
“Look into the whites of my eyes,” he said. “There isn’t enough room for both of us at the top here. We both know that.” He paused and stared at Diamond intently. “I’m willing to step aside to make this work for the firm.”
For all that, Sorkin’s account gives the impression that egomania and personality clashes were rarely, if ever, decisive in the end; if deals crashed, it was because the numbers were what they were. In one good scene, a Chase banker named Tim Main embarrasses his boss, Jamie Dimon, during a sales call by telling a roomful of AIG executives that it is important for clients to “recognize their own problems and shortcomings.” On Wall Street, this is considered a major faux pas. Main was taken off the deal. AIG failed anyway.
There wasn’t much anybody could do at this point. Of course, that’s the problem with this book.
At first glance, TBTF is a simply the latest book to gain entrée to the executive suites where important decisions are made and recreate key scenes in a novelistic fashion. It has drawn comparisons to classics such as Bryan Burrough and John Helyar’s Barbarians at the Gate (1990), but such comparisons are unfair to all sides. Indeed, rereading Barbarians, which is richer by an order of magnitude, shows just how much power relations have shifted between journalists and Wall Street. Back then, access brought a lot more.
Sorkin’s book is something different. It was written in a hurry and in quasi-real time. Its reliance on gaining access to key players is nearly total, and those big shots are much more media-savvy than their predecessors. This throws the limits of the form into high relief.
All this is important because there’s a great battle going on right now over the narrative of the financial crisis—its causes, its costs, its meaning, and its implications. More than one reviewer has called TBTF the defining book of the financial crisis, but that cannot be true. The book itself makes no such claims. And common sense tells us that an account of the last few months before the crash as seen by elites (even two hundred of them) can’t hope to encompass a crisis of this scope. This perspective would naturally generate a narrative about these elites’ heroic efforts to save the system, not one about why the system needed saving in the first place.
Meanwhile, there’s also a mini-struggle going on within business journalism itself over how best to cover the crisis. Sorkin’s book helps draw a bright line between deal journalism and the work of accountability-oriented reporters. In the former, the reporter-source relationship is more transactional, with a focus on securing insider access; the latter maintain greater distance from their subjects and rely for their material on financial filings, lawsuits, whistleblowers, short sellers, nonprofit groups, and dissidents of all stripes—not insiders, but outsiders. As it happens, their sources were right about this crisis, while Sorkin’s insiders were part of the problem.
In a sharp profile of the author in New York magazine last November, Gabriel Sherman recounts a dispute between Sorkin and two Times colleagues, Don Van Natta Jr. and Gretchen Morgenson. The two investigative reporters suggested that Sorkin’s book had “piggybacked” on critical information they had obtained about a secret ethics waiver that allowed Henry Paulson to negotiate with his old firm, Goldman. The dispute isn’t important in itself. Yet it vividly juxtaposes Sorkin, whose stock-in-trade is gaining the trust of the powerful, with two reporters who adopt a more confrontational approach.
Bill Keller, the Times’s executive editor, defended his young star by papering over the differences between the two reporting strategies. At heart, Keller wrote in an e-mail to Sherman, Sorkin is “a classic beat reporter.” From Keller’s point of view, apparently, this is an acceptable bit of newsroom diplomacy. But readers, at least those eager to understand exactly what they’re reading, don’t benefit from this blurring of distinctions.
Of course, there is more than one approach to business reporting. Take, for example, Bloomberg’s Mark Pittman, a noted investigator who wrote muckraking exposés about Goldman’s issuance of defective CDOs and the like. Pittman, who died unexpectedly last November, was known in some circles as “the man who sued the Fed,” the reporter behind a Bloomberg LP suit to pry loose details about the central bank’s trillion-dollar emergency lending programs.
While Pittman’s adversarial style paid major dividends, it should be obvious that his approach would not gain him the kind of telepathic rapport that Sorkin seems to have developed with the Fed chairman (“. . . the towering white peaks of the Tetons offered a majestic view, but one that no longer took Ben Bernanke’s breath away the way it once had.”)
Readers should be aware of the differences in reporting styles and understand them for what they are: a division of labor. Neither will give you the full picture; one aims to tell you what the players said, while the other tells you what they did.
But even with that caveat, TBTF does show some of the downside of relying so heavily on Wall Street insiders. For one thing, in six hundred pages, there’s surprisingly little news here. As noted, there is a torrent of previously unreported facts—but most of them amount to historical footnotes, not major revelations that alter our fundamental understanding of events. One notable exception: Sorkin demonstrates that Goldman executives’ bluster about the firm’s viability was just that—bluster. They were terrified. On most of the big questions, Sorkin’s details tend to support official versions of events (which is not necessarily a bad thing). The revisionist charge that the decision to let Lehman fail was made in bad faith is contradicted by the book’s depiction of Paulson (a “straight-shooting Midwesterner”) as selflessly and tirelessly trying to do the right thing, despite ankle-biting from the press and Congress. Likewise, Sorkin helps to debunk the theory that Goldman engineered the aig bailout with a scene that shows Geithner himself floating the idea.
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.
In the book’s final paragraphs Sorkin finally drops the mask of objectivity and offers his own view of the protagonists. He reports that Jamie Dimon sent a note of encouragement to Hank Paulson, in which the JPMorgan Chase ceo quoted Teddy Roosevelt’s famous “man in the arena” passage (“It is not the critic who counts: not the man who points out how the strong man stumbles or where the doer of deeds could have done better. The credit belongs to the man who is actually in the arena . . . .”). Sorkin writes:
It was a remarkable quote for Dimon to have chosen. While Roosevelt’s words describe a hero, they were deeply ambiguous about whether that hero succeeded or failed. And so it is with Paulson, Geithner, Bernanke and the dozens of public and private-sector figures who populate this drama. It will be left to history to judge how they fared during their own time “in the arena.”
This is, in a sense, Wall Street’s view of itself: well-intentioned men who dare to take risks while timid souls (the press, politicians, investors, borrowers, taxpayers) carp and complain. It doesn’t take much critical distance to realize that this is not the whole story, not by a long shot.
For all its flaws, TBTF remains a work of extraordinary reportage that gives readers access to some of the nation’s most powerful financial figures. It’s also a reminder, however, that on Wall Street, nothing is ever free.