Product Description

One 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.

In A Colossal Failure of Common Sense, 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.

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.

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.

Product Details

• Amazon Sales Rank: #1439 in Books
• Published on: 2009-07-21
• Released on: 2009-07-21
• Format: Deckle Edge
• Original language: English
• Number of items: 1
• Binding: Hardcover
• 368 pages

Features

• ISBN13: 9780307588333
• Condition: NEW
• Notes: Brand New from Publisher. No Remainder Mark.
• Click here to view our Condition Guide and Shipping Prices

Review
“...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...”
—Michiko Kakutani, The New York Times

“... describes a CEO ­acting as if his firm was too big to fail.”
—Wall Street Journal

“...poignantly told...from an insider [who] witnessed, often in amazement and disgust, the corporate dysfunction and hubristic leadership that led to [Lehman’s] demise.”
—BusinessWeek

“...engaging and even funny.”
—Fortune


From the Hardcover edition.

Review
“...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...”
—Michiko Kakutani, The New York Times

“... describes a CEO ­acting as if his firm was too big to fail.”
—Wall Street Journal

“...poignantly told...from an insider [who] witnessed, often in amazement and disgust, the corporate dysfunction and hubristic leadership that led to [Lehman’s] demise.”
—BusinessWeek

“...engaging and even funny.”
—Fortune

About the Author
LAWRENCE 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.
 
PATRICK ROBINSON wrote Lone Survivor with the U.S. Navy SEAL Marcus Luttrell.


From the Hardcover edition.

Customer Reviews

The quintessential barbell trade
Two kinds of people are likely to be attracted to this book: the common man in the street who wants to know how a company like Lehman blew up so spectacularly and the financial markets insider who wants to know the inside scoop.

If you are the former, this book is likely to please. It has all the elements of a pot boiler - the breathless accounts of secret meetings, mutiny in the boardroom and the heroic efforts of a few key guys trying valiantly to save the sinking ship. It has the relentless enemy and the arch villain. The only thing missing is the scantily clad woman draped over the hero's arm.

The other side of the barbell is the financial services insider who knows all the acronyms inside and out - CDO, CLO, RMBS, CMBS, SIV who is nevertheless looking for a straight account of what went wrong - like the classic 'smartest guys in the room' on the Enron disaster.

If you are on that side of the barbell, steer clear of this book. It offers no insight into anything, except perhaps the massive ego of a low level trader. By all accounts, Larry McDonald should never have been allowed to place the kind of bets he claims to have made. He was obviously a junior trader on a bond desk that used shareholder money to short everything in sight taking massive short CDS positions on all sorts of names, good and bad. The irony seems entirely lost to him, but his desk was part of the CDS problem - buying protection with no underlying holdings.

Like any gambler, he worships the analyst (Jane Castle) who gave him the hot tip - (Buy Delta, young man!) but is too dumb to acknowledge that Delta could easily have woundup another Eastern, or more to the point, another TWA. The 'hostile' bid from US Airways that made his profit, nearly killed US Airways... but I digress.

Larry does let his political persuasions come through. Clinton is an arch villain for letting Roberta Achtenberg loose on banks 'forcing' them to lend to the huddled masses. 'Easy mortgages were the invention of Bill Clinton's Democrats' he proclaims. Never mind that the CRA ran for over 12 years with nary a problem until the boneheads on Wall Street decided to get in on the action by securitizing it.

Perhaps the most telling passage comes in the tail end of the book and summarizes it quite well:

"All my life, I've been a laissez-faire Ronald Reagan / Margaret Thatcher capitalist, swearing by the market, taking the risks and the devil take the hindmost. But this one time, I was looking for a Givernment rescue and I wasn't going to get it"

This one time. When my stock value is at stake, the principles I held all my life just vaporized. Hank Paulson should have cared more about my stock options in Lehman. That son-of-a-bitch was making an example out of Lehman with *MY* money.

This book is a lousy excuse for a tell-all or even a straight accounting of the events leading up to Lehman;s demise. 'When Genius Failed' this ain't.

Self serving badly written rubbish
As a former Lehman Managing Director who worked with many of the key characters in this book, Lawrence McDonald excepted, I would strongly recommend potential readers to avoid this poorly written, turgid, self-serving drivel. The author, a relatively junior employee, clearly had no access to most of the protagonists in Lehman's demise, other than a small coterie of New York Fixed Income colleagues. This is an ill-informed rant, which simultaneously attempts to whitewash a select group of individuals. There is a great book out there waiting to be written about the fall of the House of Lehman, but this is not it. If I could rate this no stars, or preferably negative stars, that's what it would get.

How corporate ethics can fail and a cautionary tale!
The collapse of Lehman Brothers is seen as the pivotal event that led to the economic collapse of 2008 and much press has been devoted to the exact chronology of how Lehman came to fail. But it takes inside knowledge to really get into the corporate psychology, culture and the psyche of the employees and Larry McDonald is that person. A farmer Vice President at Lehman, McDonald has the knowledge and insight to know what led Lehman to take the actions that ultimately led to its demise and McDonald repeats quite convincingly here his central premise as to what led to the collapse; that it wasn't a large number employees, but only eight, including CEO Richard Fuld. It was the investment strategy of this small coterie of employees that overextended Lehman's holdings of credit default swaps, collateralized debt obligations and derivatives that ultimately led to Lehman's desperate need to de-leverage and quickly seek an infusion of capital. McDonald paints a portrait of detached and distant senior executives who created an almost separate lair at Lehman's headquarters that only served to increase their detachment. In turn these leaders inculcated a culture of relentless demand for results led employees to take greater risks and in turn fostered a culture of greed.

McDonald's tale of `mission creep' when it comes to declining ethics is a familiar tale whether it is WorldCom, Enron or Lehman. But at times his premise seems a bit conflicted: if the truly destructive forces at Lehman were limited to these eight employees alone then why focus on the broader culture of declining ethics? Weren't those declining ethics equally responsible for Lehman's collapse? Can someone so close to the situation really be objective in analysis and conclusions? McDonald certainly does seem to have done his homework on the research and there are some genuine bombshells in here, especially the meeting between then CEO Richard Fuld and then-Treasury Secretary Henry Paulson regarding Lehman's de-leveraging. The upshot of the meeting was Fuld sharply criticized Paulson both personally and professionally, and McDonald posits that it was this interchange that likely led to Paulson's decision not to intervene to save Lehman Brothers. Given recent developments with Paulson regarding Merrill Lynch's shotgun marriage with Bank of America the veracity of McDonald's story seems to be increasingly true.

While there is a flood of books on the economic collapse, the best ones more narrowly focus on specific players as it's easier to follow microeconomic stories than macroeconomic ones. "A Colossal Failure..." follows in the tradition of great books such as "Barbarians at the Gate" about the takeover of RJR Nabisco or "The Smartest Guys in the Room" about the Enron fiasco. "A Colossal Failure..." is very well written and well researched, but it is also a chilling look into not only McDonalds psyche, but those of his compatriots on Wall Street. No one wakes up in the morning plotting how to destroy their company that day, but the erosion of ethics is so gradual that many wind up doing things they ultimately come to regret dearly. The damage to their resumes, to their credibility, and their ability to find a new job is often irreversible. To varying degrees McDonald partially succeeds in his argument that it was the gang of eight, who he names in the book, which ultimately brought Lehman Brothers down. But to a larger degree it was many of the employees, himself included, who were the willing participants that changed to corporate culture to one of unbridled greed that ultimately led to the fall. "A Colossal Failure..." is at once a roman a clef and a cautionary tale to all of corporate America; this too could be you if you're not careful!