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Chasing Goldman Sachs by Suzanne McGee - Excerpt

Chasing Goldman Sachs by Suzanne McGee - Excerpt

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You know what happened during the financial crisis … now it is time to understand why the financial system came so close to falling over the edge of the abyss and why it could happen again. Wall Street has been saved, but it hasn’t been reformed. What is the problem?

Suzanne McGee provides a penetrating look at the forces that transformed Wall Street from its traditional role as a capital-generating and economy-boosting engine into a behemoth operating with only its own short-term interests in mind and with reckless disregard for the broader financial system and those who relied on that system for their well being and prosperity. Primary among these influences was “Goldman Sachs envy”: the self-delusion on the part of Richard Fuld of Lehman Brothers, Stanley O’Neil of Merrill Lynch, and other power brokers (egged on by their shareholders) that taking more risk would enable their companies to make even more money than Goldman Sachs.

Through probing analysis, meticulous research, and dozens of interviews with the bankers, traders, research analysts, and investment managers who have been on the front lines of financial booms and busts, McGee provides a practical understanding of our financial “utility,” and how it touches everyone directly as an investor and indirectly through the power—capital—that makes the economy work. To read more about Chasing Goldman Sachs and Suzanne McGee please visit Random House at www.randomhouse.com.
You know what happened during the financial crisis … now it is time to understand why the financial system came so close to falling over the edge of the abyss and why it could happen again. Wall Street has been saved, but it hasn’t been reformed. What is the problem?

Suzanne McGee provides a penetrating look at the forces that transformed Wall Street from its traditional role as a capital-generating and economy-boosting engine into a behemoth operating with only its own short-term interests in mind and with reckless disregard for the broader financial system and those who relied on that system for their well being and prosperity. Primary among these influences was “Goldman Sachs envy”: the self-delusion on the part of Richard Fuld of Lehman Brothers, Stanley O’Neil of Merrill Lynch, and other power brokers (egged on by their shareholders) that taking more risk would enable their companies to make even more money than Goldman Sachs.

Through probing analysis, meticulous research, and dozens of interviews with the bankers, traders, research analysts, and investment managers who have been on the front lines of financial booms and busts, McGee provides a practical understanding of our financial “utility,” and how it touches everyone directly as an investor and indirectly through the power—capital—that makes the economy work. To read more about Chasing Goldman Sachs and Suzanne McGee please visit Random House at www.randomhouse.com.

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Publish date: Jun 15, 2010
Added to Scribd: Jun 24, 2010
Copyright:Traditional Copyright: All rights reserved

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GOLDMANSACHS
Suzanne McGee—CHASING—
HOW THE MASTERS OF THE UNIVERSEMELTED WALL STREET DOWN . . . AND WHYTHEY’LL TAKE US TO THE BRINK AGAIN
 
Copyright © 2010 by Suzanne McGee All rights reserved.Published in the United States by Crown Business, an imprint of the Crown Publishing Group, a division of Random House, Inc., New York.  www .crownpublishing .com CROWN BUSINESS is a trademark and CROWN and the Rising Sun colophon areregistered trademarks of Random House, Inc.Library of Congress Cataloging-in-Publication DataMcGee, Suzanne.Chasing Goldman Sachs/Suzanne McGee.—1st ed.p. cm.1. Goldman, Sachs & Co. 2. Investment banking—United States—History—21st century. 3. Financial crises—United States—History—21st century. 4. Finance— United States—History—21st century. I. Title.HG4930.5.M38 2010332.660973—dc22 2009053440ISBN 978-0-307-46011-0 Printed in the United States of America
 Design by Philip Mazzone 
10 9 8 7 6 5 4 3 2 1First Edition

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pm9531_1 reviewed this
Rated 4/5
Loads of financial information about the decline of Wall Street firms. Hillary is a great narrator. She has a voice that made me keep going through the book even when I had trouble understanding who was who. Still a good coverage of a very important topic.
carmenere_1 reviewed this
Rated 5/5
Unlike the Wall Street disaster of the past few years, occurring in part, because of the highly risky investments which they sold, there is nothing risky about making a small investment in Suzanne McGee’s Chasing Goldman Sachs. This comprehensive explanation of the financial meltdown will payback with dividends.In her book, Ms. McGee chronologically lays out the events which allowed the financial meltdown of the first decade of the new millennium. I have read the newspapers, studied the magazines and listened to “the experts” but none of them have been more clear, concise and succinct than Ms McGee’s expose. She reminds the reader that the meltdown didn’t happen suddenly but elapsed over many years with people from many different stations of life, doing many things they should not have been doing. When lapses in judgment melded and greed overcame fiduciary responsibility the events came to fruition and ruin. Chasing Goldman Sachs is written in a language that a novice may understand yet does not dumb down the experts. I truly enjoyed this book and feel all the wiser for have read it, many times re- reading passages that left me in disbelief.It is only unfortunate that a glossary is not included for ease of reference to technical terms.Disclaimer: Suzanne McGee is a friend on LibraryThing. I've tried to be objective and think I've mostly succeeded. Ms. McGee has not seen this review before my posting it.
phebj reviewed this
Rated 5/5
This is a book that lives up to its promise--to explain what caused the near total collapse of the financial system in 2008. Basically, two separate trends collided head-on and now we're all dealing with the fall-out. The first was the transformation of Wall Street firms from private partnerships that focused on building long-term relationships with their clients to publicly-owned behemoths whose primary concern was earning the maximum short-term profits for their shareholders by doing increasingly risky deals. The second trend was the steady erosion of financial regulations by politicians in Washington. Or, as the author more colorfully refers to it, Wall Street ended up having a love affair with extreme banking at the same time it had no effective adult supervision. There is alot of food-for-thought in this book. Some of the things I found interesting were the discussions of (a) the historical antecedents of today's problems (e.g. the elimination of fixed trading commissions in 1975 which forced Wall Street firms to look for other ways to make profits and the change in attitude about risk-taking when investment banks started to "go public" in the 1970s and make decisions with other people's money--their shareholders); (b) the problems with trying to manage risk (e.g. the difficulty of predicting risks that have never happened before, the misplaced faith in computer risk models, the incentive pay structures that rewarded risk-taking, and the lower pay and stature of risk managers and regulators); and, (c) the argument that the directors and officers of Wall Street firms were actually fulfilling their legal (fiduciary) duty to their shareholders by earning the largest possible profits in the shortest possible time. One of the author's main points is that the core function of Wall Street used to be primarily that of a financial intermediary--bringing together those that needed capital ("Main Street" businesses) with those who had it (investors). She compares this function to that of a utility, one that "enables capital to flow more or less smoothly through the economy the way power flows through the electrical grid or water through a muncipality's water and sewer system." (p. 22) Of course, utilites are not particularly profitable and are heavily regulated, neither of which Wall Street wants to be. Wall Street may have looked something like a utility in the past but what we ended up with is more akin to a casino, where Wall Street firms were mostly focused on making profits (i.e. chasing Goldman Sachs). The question now is can we create a new Wall Street that is accountable to the entire financial system and not just itself. I've read several books about the economic collapse in 2008 and this one is the best so far. It's well-written, interesting and informative, and I found it to be a balanced account of the myriad events, people and influences that contributed to the current recession. And mercifully, for me, it didn't go into all the intricacies of Wall Street's esoteric financial products (which I can never entirely follow). I would highly recommend it for anyone who wants an understandable explanation of why things went so wrong on Wall Street and am giving it 4 1/2 stars. (The only things that would have made it better for me would have been the inclusion of a glossary and a timeline because there are so many different pieces of information to keep track of.)
drneutron_1 reviewed this
Rated 4/5
Disclaimer: Suzanne McGee is a friend on LibraryThing. I've tried to be objective and think I've mostly succeeded. Ms. McGee has not seen this review before my posting it.=======The last few years have certainly been interesting, economy-wise. Whether you've been laid off and can't find a job, or like me, still employed but seeing half your retirement savings disappear, it's clear the financial system in the US (and the world!) is in the midst of disaster. And we'll be in recovery for years to come. Chasing Goldman Sachs is Suzanne McGee's account of the conditions that led to the meltdown, the meltdown itself, and discussion of what when wrong and how to make sure it doesn't happen again. I hate to say this book is good - I certainly don't enjoy reading about this kind of thing - but in reality, it was good. It was good to get a pretty clear picture of what happened. It was good to see some discussion of how to prevent future meltdowns of this kind. Chasing Goldman Sachs will likely make you angry, but hopefully, it'll be the kind of angry that drives us to accomplish something. So, yeah, I'll say this is a good book.McGee has covered the story pretty well. There are a few gaps that I would have liked to see filled. I'm a mathematical/engineering sort of person, so I would like to have seen more technical detail on what some of these financial instruments really are and how risk is defined and modeled in the industry. I do understand though, that material is out of scope for the book. I'm also the kind of person who likes to get other opinions on topics like these that are somewhat subjective, so I'll likely be reading more on the meltdown.Recommendation: Chasing Goldman Sachs is a good introduction to the meltdown and offers some interesting ideas on future regulation and changes in the industry itself to prevent this sort of thing in the future. It's well worth the time, especially for those not so familiar with the economic and financial landscape of the US.
tadad_1 reviewed this
Rated 4/5
Standard Disclosure: I consider Ms. McGee an online friend, though this wasn't a free reviewer's copy. Should that give you some concern about my opinion, I understand...though I don't think so.If you're sitting, staring at your 401k statement and wondering why it's half the size it used to be, then this is the book for you. If you already know why, then I'd merely recommend this book. Suzanne McGee walks us through a tangled skein of motivations, incentives, actions, inactions, failures to do a job, inabilities to do a job and just plain absence of common sense that came together in what one Wall Streeter characterized as a Perfect Storm to cause the financial crash we just experienced. What emerges is that it wasn't such a fluke event as the epithet used would imply. Shareholder expectations, compensation packages and regulations, when coupled with a political agenda and fading memories of the last big crisis, made this, if not inevitable, at least not improbable.Her explanation is clear and methodical and likely to make you angry: if you're one of the Wall Street players or government regulatory officials...well, she names names and doesn't pull too many punches; if you're not one of those individuals...well, she names names and specifies compensation packages. Only the rating agencies seemed to get off with a light slap on the hand.Her conclusion, as the subtitle implies, is that it's likely to happen again. To use her term, it's in the DNA of Wall Street to act this way. Unless regulators can get a handle on it—and the rapidly-evolving nature of the beast makes that extremely difficult to do even if Washington, somehow, summons the necessary political will—it won't be junk bonds or CDOs the next time around, but the appetite for risk will get ahead of common sense and the cycle will repeat itself. In a way, that's a bleak picture. And that's why it's important to understand some of what went on this time around. So, strongly recommended if you are largely unaware of why, recommended if you understand what transpired.I'd recommend reading a paper copy of this book rather than an electronic one. The cast of characters is large and the dramatis personæ at the beginning of the book is a useful reference. It's hard to flip to it quickly on a Kindle.
lindapanzo reviewed this
Rated 5/5
I rarely ever read business/finance-type books but if more of them were like this one, I probably would read more of them.If you've ever wondered how to make sense of the Wall Street fiasco or wondered how it could ever happen and whether it could happen again, this is a book for you. If you've ever heard financial news on the news and wondered what it really meant, again, this is a book for you. If you've heard terms like "tranches" or "clawbacks" and never knew what they meant, this is a book for you.Author McGee (LTer Chatterbox) has a remarkable knack for putting difficult topics into easy to understand language in this information-packed, informative book. Highly recommended!!Note: The author is an LT friend but I'm a paying customer on this one and I thought it was terrific.
cushlareads reviewed this
Rated 5/5
This book should be required reading for all new MBA graduates who're about to start working for an investment bank, and every one who cares about what happens to the financial system and wants to understand how we got to the disaster of 2008. This is the 5th book I've read about the financial crisis this year, and it's one of the best. Whether you are working in financial markets or are someone who skips the business pages because you find them really boring, you'll get a lot out of this book. It's extremely readable, and there isn't the snide tone that comes through in lots of financial crisis reporting. Throughout, the author is balanced in her coverage of why decisions were made and what was wrong. The most interesting parts of the book, and the bits that will be new to readers who've already read Too Big to Fail or The Big Short, is the excellent discussion of the private equity boom and the changes that go back 20 years, not the most recent stuff. The chapter on regulatory failure was great, but could have been 5 times as long as it was. The fragmentation of the regulatory agencies and their incentives to placate the companies they regulate in the US have a lot to answer for. I also think there isn't enough in the book about how CDOs have been a good development - there are plenty of Americans who benefited from securitisation of home loans through greater housing affordability. Not everything that comes out of a bubble is bad. But these are minor quibbles. Disclosure: the author is an online friend, and sent me an early review copy of the book. I tried not to let this affect my review.
richardderus reviewed this
Rated 4/5
Not to put too fine a point on it, but does the world *really* need another book about The Meltdown That Ate Our Jobs? Do we *really* have anything left to learn about these greedy so-and-sos whose pursuit of their own profits gifted us with a huge expansion of the Federal debt?In a word, yes.Suzanne McGee (an LT member and close online acquaintance of mine) assumes that her readers are smart, savvy, and plugged in, so she hits only the highlights of the WHAT about the crisis. Her brief, as the subtitle of the book "How the Masters of the Universe Melted Down Wall Street...and Why They'll Take Us to the Brink Again" makes clear, is analyzing and explaining WHY.She does this in as honest and non-judmental a way as anyone could. She's not pointing fingers at one person per chapter, she's pointing up the systemic and cultural failings that, quite naturally and seemingly inevitably, led to a culture of no-risk gambling that permeated late twentieth century business. It took until the end of the Aughties for the chickens to come home to roost, but as they always do, they did. And who pays? All of us peons, that's who, which is exactly how the system is set up and remains set up to this day.Her style is spare, unfussy, and dryly witty. Her story provides its own plot, so I can't say whether she's good at plotting. She knows how to give a telling detail! "'When {the New York Stock} Exchange is public, when people are willing to own it, it's a sign of a stable financial system, argues {a Canadian investment-firm billionaire}, who also owns stakes in publicly traded stock exchanges worldwide, from Europe to Latin America...The kind of push that come from shareholder-investors to become more competitive and efficient is the best way to make sure an organization is as effective as possible, he adds." (p137, ARC edition) This comes in a book that traces "efficiency" as the principal author of the megadisaster of 2008...and does anyone remember May 2010, when the "efficient" robo-trading powerslide of the Exchange caused systemic fantods?McGee states, makes, and supports her points throughout this book with a lifetime's reportorial experience and a skeptic's "prove it" attitude. She's done the financially semi-literate a huge and signal service in writing this book. It's a good, involving, and deeply frightening read. Recommended to all who aren't mouth-breathing Fox News watchers.
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