A little more than a year since the death of Lehman Brothers triggered a worldwide panic, the assembly line for books on the financial crisis has begun rolling out in earnest. There’s Paul Krugman’s The Return of Depression Economics and the Crisis of 2008, where the Nobel Prize winner continues his crusade in favour of large government interventions in the economy. Then there’s John Taylor’s Getting Off Track: How Government Actions and Interventions Caused, Prolonged, and Worsened the Financial Crisis, where the Stanford economist does the opposite. There already may be 20 such books to choose from, each with an agenda to promote or rip apart.
So the world needn’t worry about finding itself in short supply of pontification—and even grandstanding—on this subject. But what’s needed is more factual reportage. Some works are trickling in, but they happen to be focused on single players or events: A more complete account is surely a more challenging enterprise. And for that, New York Times business writer Andrew Ross Sorkin has to be applauded for his mammoth Too Big to Fail, a tale of those financial institutions that were so important that their tottering almost made the entire financial system too much to save.
As the subtitle describes it, the book is an “inside story of how Wall Street and Washington fought to save the financial system—and themselves”. And Sorkin means “inside”: He impresses the reader by regurgitating in fantastic detail—and often in direct quotation—the thousands of conversations, phone calls and meetings among bankers, lawyers and regulators from March to October 2008. Sorkin knows what book Goldman Sachs CEO Lloyd Blankfein was reading on his plane ride to Russia. And he even knows when Henry Paulson, then US treasury secretary, felt so sick trying to staunch the market’s bleeding that he vomited.
That’s a level of detail journalists would give an arm and a leg to gain access to. And Sorkin’s done it at the age of 32. His DealBook report for the Times has become a must-read for those involved in mergers and acquisitions, and through it, he has earned himself an enviable Rolodex of New York CEOs and Washington regulators. Having tapped possibly every one of his contacts, his reporting confirms what till now was conjecture in the crisis narrative (UK regulators torpedoed US attempts to merge an ailing Lehman with Britain’s Barclays), or sometimes introduces information the public had little whiff of before (the 2009 US public-private programme to aid bank capitalization was based on a private letter written by Warren Buffett to Paulson in October 2008).
To appreciate the level of detail Sorkin provides, it’s worth going back to last decade’s pre-eminent work on Wall Street hubris. In When Genius Failed, Wall Street Journal reporter Roger Lowenstein reconstructed the 1998 collapse of Long-Term Capital Management, a large hedge fund that, like Lehman, ended up posing a risk to the entire financial system. That’s a story that implicitly forms the backdrop to not just the 2008 crisis, but also explicitly at times to some of the characters involved in Sorkin’s tale. Still, Lowenstein—who spends most of his time paraphrasing, and hence interpreting, what happened—can’t hold a candle to Sorkin. One man’s interpretation becomes another man’s pontification, and Lowenstein’s biases are all too well revealed in his tirades against free-market zealotry or financial engineering in his concluding chapters.
Sorkin deftly avoids taking such stances, in part because of his superior reporting, and in part because he knows the 2008 crisis has already spawned a polarizing debate. This is most evident in his treatment of Paulson. We get to see a lot through Paulson’s lens, but, thanks to Sorkin’s multiple sources, we get other perspectives too—a sense of balance that is evoked in the poignant analysis of Paulson’s tenure in the epilogue.
The problem is this balance can disappear if Sorkin has to rely on single sources: Even if he may have no agenda, he can import that of his sources. A recent New York magazine article on Sorkin relates how his peers often mistrust his judgement because of his closeness to his contacts. For instance, his treatment of Tim Geithner, then the New York Federal Reserve’s head and the regulator most involved after Paulson in responding to the crisis, raises questions. We see a lot via Geithner; but, unlike in Paulson’s case, there are rarely competing perspectives offered—either because Sorkin doesn’t have access to them, or doesn’t bother telling the reader.
This dilemma comes to bear in perhaps the most controversial action the US government took post-Lehman and one that Geithner orchestrated: de facto nationalizing the insurance giant AIG. In November, a government watchdog issued a scathing report on the AIG bailout, targeting Geithner—who now appears to be changing his rationale for the bailout. Yet, nothing in Sorkin’s narrative finds Geithner’s actions impeachable.
To his credit, Sorkin has at least guarded against other iterations of this problem, going as far as to often report only direct quotations. And he admirably restrains himself from analysis, which often becomes a conduit for agenda. In the process, he gives us spellbinding journalism that can surely serve as the first draft of history for others to later pore over “who’s to blame” and “how it could have been different”.