Brandon Nelson
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A Colossal Failure of Common Sense
I finished a great book recently, and if you’ve come to enjoy this blog, I bet you’ll enjoy the book. It’s titled “A Colossal Failure of Commen Sense: The Inside Story of the Collapse of Lehman Brothers” and it was written by Larry McDonald.
Lehman Brothers was a giant, world-renowned, world-class Wall Street investment bank with nearly 150 years of history, that was, according to McDonald’s telling, driven to bankruptcy in 2008 by a CEO and president both of whom are described as almost inhumanly asinine and greedy.
When men in positions of power with those egregious qualities were faced with the never-before-seen profit margins during the real estate mortgage “free-for-all” it was like the fat kid in Willy Wonka and the Chocolate Factory. Lehman — and a lot of other banks and investment houses — went on a global spending binge the likes of which the world had never seen.
All the while, the rating agencies of Standard and Poor’s, Fitch, and Moody’s were giving the now-known-to-have-been ridiculously risky, bundled sub-prime mortgages full AAA ratings, as if they were as safe as government bonds, as if the gross amount of leverage in the system was somehow sustainable infinitely into the future.
McDonald, a bond trader, was inside the walls of Lehman watching the unraveling first hand. He describes time and again as some of the brightest, most respected minds in all of Wall Street attempt in vain to warn upper management of the over-leveraging… that it MUST and WILL come collapsing down in an apocalyptic market crash.
But to no avail. Inside their ivory tower on the 31st floor, the boss and his right hand man can take only one course of action through it all: Spend! Spend! Spend!!!
I cringed today when I read in the Bellingham Herald that Whistler Blackcomb ski resort is in foreclosure, and may in fact change hands in the very middle of the upcoming Olympic Games. And that, yes, Lehman was involved as a lender for the in-default owner, Intrawest LLC.
Ironic timing. Check out the book, and let me know your thoughts.
