A Colossal Failure of Common Sense -
The Inside Story of the Collapse of Lehman Brothers
by Lawrence G. McDonald with Patrick Robinson
Reading Lawrence G. McDonald's "A Colossal Failure of Common Sense," one might be tempted to think that Lehman's bankruptcy, was in fact too mild a punishment for the
firm's management. The book is a brief against Lehman's former chief executive, Richard
Fuld, who appears by turns arrogant, stupid, greedy, reckless and clueless.
Mr
McDonald was a trader at Lehman, and the book's subtitle promises the inside story. He was laid off several months before the
firm's collapse in September. Therefore the sources for such details are often left unclear, though, and little wonder.
What cannot be disputed are the facts of the mortgage mania, which was propelled by "the
ferocious undercurrent of rock-bottom interest rates," in Mr McDonald's word. Lehman was itself caught in the "
ferocious undercurrent".
In his book, he mentioned three of the cleverest financial brains, Mike
Gelband, the
firm's fixed income chief, Alex Kirk, global head of trading research and sales and Larry McCarthy, head of the bond trading had all warned Mr
Fuld about the unsustainable risks Lehman is taking. Therefore if Richard
Fuld had listened to what their warning, the catastrophe might have been avoided.
But there is one point on which all accounts of Lehman agree: Mr
Fuld was shocked that the government did not come to the
firm's rescue. When asked at the hearing why Lehman wasn't saved when other banks were, he answered:" Until the day they put me in the ground, I will wonder." It's clear that he did not expect bankruptcy to happen.
