Too Big to Fail is an examination of what went on in the insides of Wall Street when it looked like the banks were all going to fold.
In some ways this is a great book. The author, who is a leading American financial journalist, has access to a wide group of the big players and he uses this well with plenty of personal insights into the way some of the most important player were thinking – although sometimes you are reading a passage and you realise that there’s no possible way that the author could know that someone was thinking in that way as the person is alone. The author must have guessed the feelings of anger and relief that seem to infuse this book like sugar in a marble cake.
Another problem with this book is that it concentrates on the personal and institutional almost to the exclusion of everything else. It is certainly true that as investors we can sometimes forget the role that politics plays, but it is not the whole role. The banks collapsed not because the government wanted them to collapse, but they collapsed due to artificially low interest rate environment encouraging some spectacularly stupid investments. You just don’t get the sense of that in this book.
It would be tempting to say that this book merely records a one of instance with an eye to a film script rather than of reportage and so it can be safely ignored by any investor who wants to think to the future. Tempting but wrong. This gives a great insight into the way in which a government reacts to a crisis, something we may find useful with the Euro soon.
The two lessons we picked up were that governments can move mountains when they want to avoid a crash and that governments have very little thought to the long term. In short the government merely plugged the leak in the dam, they’ve not reinforced the dam and the pressure is still building up.