I recently completed reading “Greed and Glory on Wall Street” by Ken Auletta. Set in the 80s, this book has already been reviewed by many over the years. Although decades old, this book is still an interesting read, especially the final chapter that talks about lost glory and the changing face of capitalism. It is interesting to note that, given the new fate of Lehman Brothers, it doesn’t surprise one that Investment Banks have been a symbol of “desperate greed” since ages. Desperate since experts put the blame on a changing society and growing complexity in capitalism as the reasons for such greed.
The author is definitely impartial in analyzing happenings that led to the then collapse of Lehman Brothers in 1984. However, throughout the narrative, there definitely was a sense that the truth is still hidden somewhere in between. After all, the people who interviewed must have planned out a strategy for keeping their names intact. Anyways, it’s exciting to understand how the job of “raising money” can be so convoluted in reality. The fact that it’s just a bunch of gluttonous individuals managing that process for an entire nation (or world depending on how one sees it), makes it all the more shocking. The mess in Ken Auletta’s version of Lehman Brothers is just one such example. A bunch of fighting kids with a singular motive to get rich quickly, empowered by a system that promotes easy handling of money, led by a management that believes only in making money, can only be nothing but a perfect recipe for disaster. It’s interesting to note that when people in Main Street don’t get a hold of how they are getting rich, they obviously can’t raise their voices against what self-proclaimed “bracket” firms in Wall Street bulging with money are up to.
This book never gives a clear picture of who the culprit was in orchestrating the demise of Lehman Brothers. In fact, I felt there was none. Pete Peterson, the Chairman, did his best to keep up his reputation as a proud investment banker. Money and fame go hand in hand, and he embraced it dearly. Lew Glucksman also did his part to keep up with his desire to mint money out of selling bonds. While one believed in prestige from corporate finance, the other believed in sales & trading. Nevertheless, both dealt with a board and a bunch of partners, who when combined together, were nothing more than a bunch of kids boosting capitalism and their bank accounts with unimaginable chunks of money.
Just when I was adjusting myself to the end result that Lew Glucksman, was brought down by a board that just wanted to keep its money safe, I read the book “Liar’s Poker” by Michael Lewis. That further changed my perspective on Wall Street banking and what could have truly happened to Lehman Brothers. In short, I would put it as nothing but changing market forces killing the super strong bond market growth in the mid 80s. It eventually led to severe losses for all firms that made boat loads of money creating and selling bonds, led to Lew’s team losing their shirt and of course Lehman, its pants.
In a capitalist world where the rules are meant to be broken, super bright men (unfortunately women didn’t have a recognizable place at that time) with IQs that help them understand how a home loan can be transformed into a completely unknown package of securitized bonds, keep changing the rules of the game. When governing bodies are slow to react (which I feel will always be the case in the fast paced world of Wall Street), a kid who can handle or break a bunch of telephones while buying and selling financial instruments will always call the shots. A 23 year old college graduate will guide the fate of an investment made by a large insurance firm through money sucked from a “not-meant-to-be-understood” health insurance premium it has been charging drug-dependent citizens stuffed with one-a-day pills for a new syndrome defined and marketed by a big pharmaceutical company trading in Wall Street to feed multi-billion dollar blockbuster drug research and become a profitable company.
I never realized money was so easy to get as long as you have a fool that you can take a ride for. The investors in the 80s obviously fell in that bracket. The investors of today may be different, and a bit more diverse (or global as some people describe today), but when they deal with Wall Street, they cannot get a better deal. After all, you make money by taking away someone else’s. Of course, Wall Street gives investors the money they desire. It’s just that as the dollar moves from one hand to the other, a few pennies slip through a small hole in the pocket. The less you feel bad about orchestrating it, the happier you feel buying large mansions in overpriced locations and smoking large chunks of expensive cigars with the arrogant belief that you are the smartest guy on the planet.