Thunder Tomes

Recent literature on the world’s financial crisis is anything but boring. These books crackle, roar and rip

Tom Wolfe, arguably the finest American writer alive, and without doubt the best business writer the US has produced, wrote a boilingly brilliant essay titled My Three Stooges on the increasing inertness of the American literary novel, at the turn of the last century. The piece was a no-holds-barred attack on John Updike, Norman Mailer and John Irving—three ageing stalwarts who according to Wolfe represented the effete corner of literature stuck in European formalism, boring as hell because it had ceased to capture the ‘lurid carnival of American life’. It’s debatable whether literary novelists have moved on or not since, but US business writers have certainly succeeded where Wolfe’s stooges failed.

There could be few carnivals more lurid than the greedfest on Wall Street, capitalism’s command central, and its satellite centres in the City of London and elsewhere; nearly $4 trillion of wealth wiped off, millions of investors and pensioners losing their entire lives’ savings; and trusted financial institutions, some of them more than half-a-century-old, folding up in a matter of days. The spate of new books—almost 50, from academic appraisals to behind-the-scenes quickies—does an engaging job of chronicling, reconstructing and analysing that carnival. Some of them on the banking crisis, like Andrew Ross Sorkin’s Too Big To Fail, have even managed to stay on The New York Times bestseller list for more than a month now. ‘Crashes and panics,’ wrote Michael Lewis in his introduction to Panic, a 2008 anthology he edited, ‘make for interesting stories and, once I’d become a full-time journalist, I found myself pulled back to write about them.’ Lewis, one of America’s wittiest business writers, is himself coming out with his much anticipated The Big Short: Inside the Doomsday Machine.

The current financial crisis, the worst since the Great Depression that preceded World War II, is the kind of event American journalism thrives on. While 9/11 and its aftermath yielded a surfeit of books on cultural theories, civilisational clashes, neo-con rhetoric masquerading as geopolitical strategy, and various new ‘isms’, the financial crisis has spawned a genre of fuzzy sociobiological analysis of greed and capitalism. But most of the rip-roarers have come from journalists.

Let’s start with Too Big To Fail. Sorkin, a 32-year-old business reporter and columnist for NYT, recounts the days that led to the near collapse of global banking. He takes you back, for instance, to 17 September 2008, soon after the collapse of investment banking and insurance giants Lehman Brothers and AIG, when the entire policymaking might of the US was trying to salvage a banking system by urging bitter rivals such as Goldman Sachs, Citigroup, Merrill Lynch and Morgan Stanley to somehow merge for their own good. In his 600 page book, Sorkin gives a rivetting minute-by-minute account of the negotiations between Henry Paulson, the then treasury secretary, Tim Geithner, the president of the Federal Reserve Bank of New York, and the bank CEOs.

Such blow-by-blow narratives can be tedious, but not in Sorkin’s telling. The recreation of scenes is intimate, each dialogue sounding searingly real. Sample this: ‘As the sun was setting, Hank Paulson was still in his office and had just gotten off the phone with Geithner. The news was not promising. Geithner told him that Morgan Stanley had no plan apart from what he called the ‘naked’ bank-holding-company scenario. Geithner said he was uncertain whether any investor—JP Morgan, Citigroup, the Chinese, or the Japanese—would come through. And he was skeptical of the Goldman-Wachovia deal. ‘We’re running out of options,’ he told Paulson. Paulson, who had been living on barely three hours of sleep a night for a week, was beginning to feel nauseated. Watching the financial industry crumble in front of his eyes—the world he had inhabited his entire career—was getting to him. For a moment, he felt light-headed. From outside his office, his staff could hear him vomit.’

Through what often reads like an action film script, Sorkin conveys how Wall Street CEOs were by turns petty, paranoid and egoistic even in the face of the worst crisis of their lives. When the investment bank Bear Stearns appeared up for sale in early 2008 for only $236 million, the CEO of a large outsourcing firm in India that serviced the bank said in private, ‘If only we could foresee such a big fall for Bear Stearns, many of us in India could have made a bid. After all it’s the Big Bear.’ Bear Stearns had never reported a quarterly loss. But it took little over a week to come apart once the credit crisis hit. One-time investment banker William Cohan gives an insider account of Stearns’ collapse in House of Cards, an up-close look with equal amounts of cash and gore.

After these thrillers, if you’re inclined to take a big picture view of the role of the free market’s Invisible Hand in all this financial mayhem, try John Cassidy’s How Markets Fail. A Briton who writes for The New Yorker, Cassidy places the crash in a historical context, beginning with Adam Smith’s famous line that it’s not from the benevolence of the baker that you get your bread, but from his profit motive—and how everyone’s pursuit of self-interest will eventually come to help everyone. He tracks this theory all the way to America’s housing boom and implosion in his hunt for what went wrong. Markets, he finds, are vulnerable to the follies and misdeeds of bankers, regulators and consumers if mindless fixations get the better of good sense. Attacking the blinkered belief in the invariable ability of the free market and free individuals to serve society at large, he sees free market fundamentalism as a case of ‘utopian economics’.

Another ‘outsider’ perspective on the crash comes in the form of British writer and Financial Times’ journalist Gillian Tett’s Fool’s Gold—a book primarily on JP Morgan’s role in the field of derivative trading. In 2003, Warren Buffett had warned that derivatives were ‘weapons of mass financial destruction’ that could harm not only their buyers and sellers, but the entire economy. Buffett dismissed the banking wizards who devised these complex yet seemingly profitable deals as madmen. Fool’s Gold is a racy account of the world of madmen who invented these financial WMDs that caused most of the devastation. What is startling is the aura of innovativeness that JP Morgan’s alchemists had about them as they went about spreading risks around, as they saw it.

During any discussion about the financial turmoil the world found itself in, a colleague who seemed puzzled about the speed and scale of the collapse would repeatedly throw up this question: “But if so many people have lost so much money, someone somewhere must have made it. Who could that be?” A question not many could answer, and to my relief, I can now offer him Gregory Zuckerman’s new book The Greatest Trade Ever. Almost all the recent books on the event look at how the system collapsed. Zuckerman, a senior Wall Street Journal reporter, prefers to tell the story of John Paulson, who saw the coming crash and made a killing by betting against the market. Paulson spent a career on Wall Street in relative obscurity, under-appreciated as an investor. He had slowly built up his hedge fund, and by 2005 or so, he started getting nervous about this whole housing market—and bet against it. He ended up making the greatest trade in financial history. In 2007 alone, he made $15 billion for his firm. In contrast, George Soros made only a billion dollars betting against the British pound in 1992. And Paulson wasn’t even a mortgage maven or real estate expert.

In his Stooges essay, Tom Wolfe lists scene-by-scene construction, liberal use of realistic dialogue, putting the reader inside the mind of characters, and notation of status details about the characters’ rank in the human pecking order as the four essential ingredients for any good naturalistic novel. The recent crop of books on the great financial blow-out are not meant to be in the fiction genre, but they sure live up to the Wolfe blueprint.

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