The collapse of Lehman Brothers precipitated the worst financial crisis since the Great Depression and an account of the events surrounding the demise of the investment bank would be of tremendous interest to students of financial history. After all, it was Lehman’s failure that turned out to be the straw that broke the camel’s back. Within a week, AIG and Merrill Lynch were gone, credit markets started seizing up, stock markets started their sharp descent and economies around the world were in recession.
I was hoping that this book would be to Crash of 2008 what When Genius Failed (read my review) is to the Long-Term Capital Management collapse of the 1990s. But it’s not even close. It’s a pity because this book has a lot going for it: one of the authors, Lawrence McDonald, worked in Lehman Brothers as a bond trader in the years leading up to its bankruptcy (hence the subtitle “The Inside Story of the Collapse of Lehman Brothers”) and would have been very familiar with the main actors of the drama and more importantly, a deep understanding of its financial aspects. In fact, I ordered this book, after hearing an interview with Mr. McDonald on CBC radio. In the interview, Mr. McDonald talked about one final Hail Mary attempt to save the company. George Walker, one of the Lehman executives, made a desperate final call to his cousin, President George W. Bush, hoping to beg him to intervene but the President declined to take the call. Instead, the book turned out to be largely an account of Mr. McDonald’s early life, how he landed a gig as a trader at Lehman, his exploits as a hot shot bond trader and how the many warnings from his group on the grave peril that Lehman was in was ignored by top management. Interesting, but that’s not why readers invested their time and money on this book.
Still, the book has some interesting parts. The collapse of Lehman Brothers wasn’t the foregone conclusion it appears in hindsight. Perhaps, if Lehman had accepted an offer of $18 per share from the Korean Development Bank as late as August 2008, it may not have gone bankrupt. And, maybe, the financial crisis would not have gotten as worse as it did. The book also shows Richard Fuld, the head honcho at Lehman in a very poor light. Much of the blame for Lehman’s demise could be laid on his autocratic and aloof management style, penchant for appointing pliant individuals to senior ranks, empire building (in the literal sense — Lehman spent billions on real estate with borrowed money) and a feckless board.
Excerpts from the book are available on Lawrence McDonald’s website. The hardcover is available from Amazon.ca for around $20.