This post will mention some of the books that I have encountered and recommend for anyone who is serious about understanding the financial crisis of 2008 and the associated recession. Who were the important personalities? What institutions were involved? What types of investments helped create the conditions? This list is by no means exhaustive, but I offer you this list of books by reputable authors to help you begin your studies.
The Quants by Scott Patterson
Mr. Patterson investigates the trend in financial investing to use mathematical stratagems to make money. Mr. Patterson follows the careers of several of the mathematical geniuses called “quants” who prowl Wall Street investment houses. Mr. Patterson touches on the original quants of Long Term Capital Management, but his focus is on the newer generation of quants operating within the last two decades. Two things were of especial interest to me. First, people built different algorithms, so obviously there are many ways to dissect the market and world commerce. Second, the algorithms often function on super-computers with little daily human oversight, so things can deteriorate with alarming speed.
The Big Short by Michael Lewis
An outstanding writer upon many subjects, Mr. Lewis returns to his original turf in the financial realm. For four years, Mr. Lewis was an investment banker at Solomon Brothers and his first book Liar’s Poker described some of his experiences in high finance. In this book, he follows a few individuals and teams. Some of these people worked for large Wall Street firms and some started boutique firms and funds of their own. The common denominator here is that all of these people accurately forecast the U.S. housing crisis based upon poor lending practices. They all attempted to capitalize on their assessment by finding vehicles to short American mortgage backed investment products.
Too Big to Fail by Andrew Ross Sorkin
Mr. Sorkin produced a massive tome, but the book is a surprisingly brisk read. The secret to Mr. Sorkin’s book is that he relies very much on recording conversations between people. The conversations are funny, frightening, educational, and much more. Mr. Sorkin begins around the time of the Bear Stearns collapse and ends with the adoption and implementation of TARP. The bewilderment and confusion expressed in the book by people who are supposed to be financial experts is priceless.
13 Bankers by Simon Johnson and James Kwak
Mr. Sorkin focused on a few of the major financial players, but Messrs. Johnson and Kwak expand the field to include some of the less often mentioned major financial institutions. Johnson and Kwak write about the legislative and business activities that have created our massive financial institutions. They also make some recommendations about how we can avoid future financially driven catastrophes.
These books I have not read, but I am eager to consult them and I think you might consider them, as well:
House of Cards: A Tale of Hubris and Wretched Excess on Wall Street by William Cohan
Focuses on Bear Stearns executives who happened also to be bridge enthusiasts, hence the double entendre title.
Liar’s Poker by Michael Lewis
Mr. Lewis discusses his time a Solomon Brothers and the legislative changes that created our modern financial condition.
On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by former Secretary of the Treasury Henry Paulson
After all of these other books, I would love to see how Mr. Paulson acquits himself in his book. Will he tell the truth or practice Revisionist history?