As the economy spun out of control in the fall of 2008, many Americans wondered what was going on. In fact, they probably still do wonder exactly what happened.
The truth may be out there, but readers shouldn’t hope to find it by reading “Too Big To Fail,” a massive tome from reporter Andrew Ross Sorkin of The New York Times. He promises an insider account of the economic meltdown, but actually delivers a gossipy report that misses the point.
Sorkin focuses on the mundane and overwrites his supposed revelations. In his first paragraph, he reports Jamie Dimon, chairman of JP Morgan Chase, “was recovering from a slight hangover, but his head really hurt for a different reason: He knew too much.”
Across the next 550 pages we’ll learn too much about Dimon (he looks good in a tight tee shirt and jeans) and his fellow CEOs (many like to work out and dine out) but not enough about what caused the economic catastrophe.
That’s because Sorkin packs his book with “from the top” reports about what various CEOs were thinking, feeling and eating in September of 2008. For example, we learn that Dimon liked the tacos at the JP Morgan cafeteria. “Though the food may not have been as good as what the Fed offered downtown, it was better than Dimon had remembered.”
But the book never makes it clear why the 99.99 percent of us who weren’t Wall Street wheeler-dealers should have bailed out those who had skin in this particular game. Sorkin casts the meltdown as a failure of the market. And, in the eyes of the well-compensated CEOs who spoke with him, it was.
But in reality the market spoke, even though a handful of well-connected people didn’t want to listen to it.
The problems began when Bear Stearns failed in March of 2008. Other major bank holding companies, including Lehman Brothers, Morgan Stanley and Goldman Sachs, would manage to hold on for a few more months, but their business model had clearly failed as well.
The leaders of these companies -- blinded by their multi-million dollar paychecks, their Connecticut mansions, their helicopter commutes into Manhattan -- didn’t care to admit that their world was changing. They had an ally in Washington. Treasury Secretary Henry Paulson had run Goldman, one of the largest and most influential investment banks. He, also, couldn’t imagine a world without these big banks, and was willing to pump hundreds of billions into them to keep them alive.
But, although the federal bailout was big, it was bound to fail. And it did.