Like most people, I watched the collapse of the global financial system in 2008 but didn’t really understand the root cause. Bear Stearns, Lehman, AIG and on and on. Just like 2001, I did notice that my brokerage statements got ugly quick.
While training for the North Olympic Discovery Marathon, I decided to get a bunch of books on the subject and figure out what was behind all the TLAs I kept seeing (CDO, CDS, etc). After reading a ton of books, I found the six books below to be quite helpful and I now have a much better understanding of what it means to be highly leveraged and why there has been such a ruckus about regulating (or not) derivatives.
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| Towers of Gold – Great book about the history of banking in the Old West, Wells Fargo and gold. Very helpful in understanding the origins of the U.S. banking system. Here’s an interesting blog post by the author as well.
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| The Ascent of Money – Niall Ferguson examines the history of currency as we know it today, along with major historical bubbles and their impact.
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| The Big Short – Another excellent Michael Lewis book. The author follows two hedge fund managers that figure out exactly how over-leveraged the housing market is and profit hugely (warning people all the while; their message fell on deaf ears). One of their big problems was trying to find the worst of the worst CDOs and their synthetic counterpart, the CDS. There were so many terrible offerings, it was hard to choose the worst. |
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| Too Big To Fail – A massive tome, written from the perspective of the bankers, the Fed and the Treasury. The failure of Lehman figures prominently. I came away with a better appreciation of Paulson, Geithner and Bernanke.
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| The End of Wall Street – Lowenstein looks at what happened before 2008 (i.e. how *did* we get in this mess?). He delves into the world of the Maestro (Greenspan) and provides some additional insight into WAMU and Citibank that wasn’t covered in Too Big To Fail.
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| Past Due – Written by Peter Goodman from the New York Times, this book examines how the average American was affected by the meltdown. The author looks in the house-is-my-ATM meme and discovers that some surprising things. I was seriously depressed after reading this book. Goodman tries to lay out a path for the U.S. to be successful in the future in the last two chapters. It didn’t cheer me up. |
