House of Cards: A Tale of Hubris and Wretched Excess on Wall Street

Please Publish book in Hindi , many people want to read this book but not available in Hindi. 50 crore Indian people talk to each other in Hindi.

Scary how some huge companies operate.

This book concentrates on the fall of Bear Stearns which was the first major financial institution to crash here in the USA. The book is casually written and does map out how quickley liquidity crisis can wipe out a leveraged firm by stepping you through the day to day happenings of the last 10 days of the firm's life. Wall Street firms are much different than other firms such as auto or computer firms. If you havent read much about Wall Street and havent understood this then this book is a good introduction to some of this. I have some sense of this as I have a brother who has worked on Wall Street for 20 years, but this book still gives a sense of what was going on in this particular crisis. Banking and especially investment banking is a highly leveraged business by definition and so the dynamics of these businesses are fundamentally different and you can get a good sense of this from this book. After walking the reader through the last 10 days of the crisis the book then goes back and takes a much broader view filling in the context by giving the history of the Bear Stearns company and then giving very detailed background information on the key longtime leaders of Bear Stearns. It is clear that Bear Stearns was a bit of a rogue shop lead by a pretty independent minded group of traders who had been at the firm in some cases for 40-50 years. In giving the history of these leaders and also filling in their expertises one can see some of the strengths and weaknesses of the firm and of the leadership in place.There is enough history in place here that you can understand how this company came to be such a stalwart of the fixed income arena as they had some of their big wins in bond markets and that is what the leadership understood best. It does appear that they had a guy running a couple of their hedgefunds who while a smart guy was not a very skilled manager and they appear to have let this guy get over his head. His manager was protecting him from interference from the "compliance" officers of the company. It also appears that this manager of the two hedge funds was engaged in fraud to the extent that he clearly saw that the mortgage derivatives from the subprime market were riskier, he was much more dependent upon these securities than he was reporting to the investors. This guy is apparrently in the courts on a couple of charges.Bear Stearns was clearly filled with some interesting characters and there are enough anecdotes from the discussions to give you a pretty good feeling for the types of salty guys they were. There are also the reports on the lifestyle that some of these guys were living and of course it is clear that those at the top had some pretty interesting lifestyles. Some of these guys had like 5 houses and couple Ferrari's. The Ceo who was forced out just shortly before the company crashed had a summer routine where he would be helicoptered in the late afternoon on Thursdays to the golf course in new jersey for a quick afternoon round. (At a cost of 1700 bucks each time, which I guess if you are worth a billion you can afford).It is also clear that there were few people in the upper eschelons of the company who had a really firm grasp of the more complicated derivatives that were instrumental in blowing up the hedge funds. It becomes clear that the risks that they were running were not very well understood by all of those in the management. This of course is not necessarily very surprising, I have seen the same phenomenon in silicon valley managers understanding the risks of the technologies that they adopt.According to the story, one of the problems was that the key derivatives expert had had his compensation reined in and so may not have been minding the store as carefully as previously when his hedge fund managers were roaming into dangerous territory. It appears that to some extent this is a story of not enough adult supervision and not enough checks and balances on a fund that was investing in some risky and complicated securites. The Upper layers of management were not wartching it too closely, but part of that is that the returns had been quite strong for 40 months in a row and frankly he was misleading people in what he was investing in. (why is not clear but it appears he was running bigger risks to keep returns up).The end of the book details the last 9 months of the collapse of the Hedgefunds up until the final 10 day liquidity crisis which ends up ending the company. In this section there is information on the final weeks of Lehmann brothers giving the reader insight into the differences in that event and Bear Stearns. There is also some discussion of the perspective of the crisis from the point of view of the last Ceo of Bear Stearns. This view appears to me to be pretty good.The Author is a guy who has worked in this industry and he clearly communicates what the places are like. He is also fairly transparent in his discussion of certain events. In a number of places he indicates that different participants view things a bit differently and he clearly indicates the different viewpoints on what happened. The author has clearly researched most of the trade press publications about Bear Stearns during this period and has had the active participation of a good number of the senior managers of Bear Stearns as interview subjects for the story that he maps out. He has done an excellent job of mapping this one out.In summary I find this an extremely informative book on the Mortgage crisis as it hit Wall Street. You will understand much better the involvement of the Investment banks in this arena. You will understand very well what happened at Bear Stearns and to a much lesser extent Lehmann Brothers. However, be aware that this crisis involves many many different parts of the economy and therefore you will not understand in any detail what happened at say Fannie Mae or Freddie Mac or Countrywide, these players in this debacle along with Congress and others like HUD are not at all discussed. This book focuses on Bear Stearns, whose collapse was pivotal and this book gives you a very good understanding of the dynamics of that, personalities, mistakes, personnel limitations, egos and all. It adds much to the picture but the overall economic debacle that we are dealing with is broader than just Wall Street. Regardless this is a valuable and well done addition to the literature. Cohan is to be commended.

This book is a thorough, well researched chronicle of the events surrounding the collapse of the investment bank, Bear Stearns & Co. and gives an excellent insight into the early stages of the historic turbelence within the financial markets which surfaced in 2007. Cohen's descriptions of the people, places and time-lines are both entertaining and informative without ever losing his way.A lot has been written about these events in a very short space of time but no author has managed to capture the mood and the moment as well as Mr Cohen. The book is right up there with Bonfire Of The Vanities and Barbarians At The Gate.. A remarkable achievement given the short space of time between the events and the book's publication.

Because the proverbial you-know-what did not really hit the fan until September of 2008 (with the one week period that included the fall of Fannie Mae, Freddie Mac, Lehman Brothers, Merrill Lynch, and AIG), many seem to forget that in March of 2008, six full months prior, Wall Street lost one of its true gem stones: the illustrious Bear Stearns. Cohan's House of Cards is not intended to walk us through every nook and cranny of the housing crisis, or even the systemic mess that took place across Wall Street. This is a 450-page play-by-play of the fall and rise of Bear Stearns in particular. I say "fall and rise", because in a twist of literary genius, Cohan starts the book with a 150-page minute-by-minute description of the final weeks of Bear. It reads like a murder mystery thriller, partly because the suspense and drama is riveting, and partly because it was, well, a "metaphorical murder", as the hubris of a few particular men, the incompetence of a slightly greater number of men, and the unfathomable selectivity of government decision-making brought down a Wall Street giant.The book is hard to put down. I am quite certain that I have never read a 450-page book as quickly as I read this one. The behind the scenes look at JP Morgan's decision to buy Bear Stearns that fateful weekend in March of 2008 was accompanied by enough back-and-forth action it would make your head spin. Cohan uses Paul Friedman, the COO of the Fixed Income Division, to lay out the narrative. Readers are given a look under the hood of a weekend from hell, wherein Jamie Dimon, the CEO of JP Morgan Chase (and arguably the most powerful banker in the entire world) several times changed his mind and re-negotiated the purchase of Bear, a company whose two options became: (1) Take whatever deal JP Morgan offers, or (2) Close your doors and turn off the lights.How does it happen that a company whose book value was $84 per share is forced to accept $2 per share in a desperate attempt to stay alive? How can a company with $18 billion of cash in the bank (their own cash) at the time be on the brink of liquidation bankruptcy? Has the leverage of a deal ever been more one-sided than it was in this case? The answers are far more important than just what they meant to Bear Stearns, for they give us a light on an entire system that became dependent on what is commonly called "overnight funding", and more technically "repurchase agreements". When the creditors of Bear Stearns became petrified that the company was ultimately insolvent, despite their decent cash reserves and phenomenal free cash flows, the rest became completely irrelevant. In a financial system that inexplicably requires every domino to believe the next domino will also work, all it takes is one domino removal to bring a company (or, the world), to its knees. Such was the fate of Bear Stearns.After walking through the historical record of JP Morgan's purchase of Bear Stearns for $2 per share (moved up to $10 one week later as a result of one of the most comical attorney errors of all time, wherein JP Morgan signed an agreement guaranteeing all the bad debt of Bear Stearns, even if the shareholders rejected the deal!!!!!), Cohan leads us on a 250-page history of the firm, beginning with its infant stages prior to the Depression. The pathologies of the men who led this firm over the years (remarkably, in an entire century, you are only talking about three or four key people) are enough to write thousands of pages on, and you have to be as dysfunctional as I am to find this so entertaining (but I really do). For review purposes, I will skip the myriad of details in this company history, but will simply say that Cohan left me feeling like I have grown up with Jimmy Cayne, the bridge-playing non-college-graduating iconoclast who led this firm for decades. Cohan has a career as a biographer if he wants one, for this was meaty stuff indeed.The questions that are germane as far as I am concerned are these:(1) In March of 2008 the Federal Deserve announced a new and unprecedented facility for primary dealers to access the Federal Discount Window. Yet, to this day, no explanation has been provided whatsoever as to why the access to this window would not be available until March 27 (too little, too late, for Bear Stearns). Ideologues can debate until they are blue in the face whether or not this measure made sense at all, but readers are right to wonder why the timing was such that it was exactly on time for everyone else who lived off of repo agreements, and exactly too late for Bear Stearns.(2) This is not so much a question as a statement of fact. Through no fault of their own that I can detect, the story of this Bear Stearns mess for the bondholders has got to be one of the most miraculous tales of good fortune I have ever seen. Stockholders saw Bear Stearns trading at $170 per share less than a year prior to their collapse, and ended up taking $10. Bondholders, who likely would have received well less than 50 cents on the dollar in a bankruptcy ended up recovering 100% of the par value of their bonds, all interest owed (and still accruing), and in one of the most ironic parts of this story, a 100% gain on stock purchased as well. For the week that Bear Stearns approved the $2 sale to JP Morgan, knowing that shareholders would fight to the death to avoid this pillaging, bondholders began buying the stock above the agreed upon value en masse, purely as a way to guarantee that the deal would happen (as they would acquire enough shares to out-vote the stockholders, and protect their huge debt position). The intent was always to lose money on the stock trade, but simultaneously guarantee that their bond deal got done. In a classic case of winning one every side of the trade, one week later JP Morgan upped their offer to $10 per share, not only giving bondholders their deal, but doubling the value of the stock they had been buying. Sometimes God has a sense of humor.(3) Tremendous moral questions remain about the propriety of a system that stopped compensating Wall Street titans for advising on client capital, and began risking their own capital. Bear Stearns died for the same reason many other firms died, or nearly died, just six months later: Excessive leverage of their own capital base, with a seeming complete and total ignorance from the men running the ship as to what was going on. I believe JP Morgan will make billions of dollars on this trade, as a $29 billion FDIC back-up to the toxic assets they bought has that effect on deals. Had Bear repo dealers decided to keep Bear afloat a little longer, perhaps they could have de-levered, and reinvented, and lived to fight another day. But when the leveraging of your balance sheet becomes a business model replacement for your operational profit and loss, something has gone astray. Have we learned? More importantly, as my next review will cover, how in the world did Lehman Brothers not learn.Kudos to William Cohan for a brilliant book. It is non-partisan, historically factual, and leaves the reader scratching their heads at what became of a legend. Life is humbling sometimes. Will the events that led to the fall of Bear Stearns also lead to a new paradigm on Wall Street, a paradigm that prices risk appropriately, that seeks to be paid (extravagantly, as far as I am concerned) for wise advice and capital allocation, or will we suffer through all of this once again? Those who feel that regulation alone can solve this problem underestimate the complexity of the system, and the depths of moral depravity. They fail to see the evolution of a shadow banking system. And they truly underestimate the moral hazard of "too big to fail" and global inter-connectedness. For decades and decades, Wall Street was villainized, and indeed, a bunch of villains existed. But they were demonized because they were making a bunch of money giving advice and allocating capital, and that demonization was wrongly directed. The 2008 demonization of Wall Street was clearly deserved, but not because of a failure to regulate; Wall Street changed. Firms like Bear Stearns that spent decades innovating, and providing the financing during times of municipal stress (see New York in the 1970'), or railroad bonds (see America during the 1940's and 1950's). A new era is coming indeed. What Cohan has helped us do is wonder out loud if the new era will look like the old one or not. It will be good for the whole world to have a strong Wall Street, and not one built like a house of cards.

Absolutely no problems. Recommended.