Roger Lowenstein is one of my favorite authors. When I found out he was coming out with a book on the financial crisis in my mind it was a must read. Readers who have been following my series of book reviews know that I have written many book reviews on the financial crisis. This will likely be my last one.
Roger Lowenstein is the author of some other best selling books. They include When Genius Failed the tale of the collapse of Long Term Capital Management(LTCM), and Buffett: The Making of an American Capitalist
. Lowenstein’s most recent book I am reviewing is titled The End of Wall Street. Not surprisingly the book has become a best seller since its release several days ago.
The End of Wall Street is the tale of the collapse of Wall Street from Lowenstein’s perspective. Lowenstein begins the book in 2006 with a description of countrywide, and their efforts to make housing more affordable. The book continues through the fall of Lehman Brothers and the sheer disaster that occurred in the months following it. The book ends off with some criticism of the key government and Wall Street players whose actions caused the crisis.
I do not like to compare books in book reviews, but I think it is necessary in this case. Lowenstein’s book most reminds me of Andrew Ross Sorkin’s Too Big to Fail which I previously reviewed [valuewalk.com]. Both books contain many of the same facts, and describe the financial crisis in depth, beginning with the housing bubble and ending with TARP and other Government actions taken by both the President and congress, and the Federal Reserve.
While I admit I found Sorkin’s book very riveting (I gave it a very positive review) I was skeptical of the some of the facts written in the book. Sorkin got access to top people in Government and Wall Street firms to get their take on various details. He presented nearly every single major player whether it was Hank Paulson, Dick Fuld, or Ben Bernanke in a positive light. I was informed by an author who wrote a book on the financial crisis that Sorkin was very kind to many of these people to get access to them.
I talked a lot about Sorkin’s book to demonstrate one major contrast with Lowenstein’s book. Roger Lowenstein writes his book with no holds barred. Roger Lowenstein is very critical of many of the major players in the financial crisis. He talks about the Democrats in Congress being more concerned about the 2008 elections than reforming Fannie Mae and Freddie Mac. He also accuses them of caring more about restricting executive pay than making sure the banking system is sound. He also has harsh words for Robert Rubin and Lawrence Summers and the policies they advocated under the Clinton administration. Lowenstein is bi-partisan in his criticism. He rips Alan Greenspan throughout the book and the free market laissez faire policies which Greenspan pursued as Fed Chairman. He also blamed the House Republicans numerous times, especially in regards to their role in defeating TARP the first time.
The one hero of the book is value guru Robert Rodriquez of FPA funds. Lowenstein starts off the book describing Rodriquez’s concern in 2006 of the USA’s reliance on debt. He was worried about ultra low interest rates in 2003 which he believed would lead to inflation, reckless borrowing or both. Rodriquez was so concerned about the practices Fannie Mae and Freddie Mac, that by early 2006 he sold all of his bond holdings from the FPA New Income Fund.
Lowenstein highlights Rodriquez throughout the book. Lowenstein states that Rodriquez realized the problem was not one of liquidity of the banks; rather it was a lack of capital. Robert Rodriquez was finally relieved when Henry Paulson decided on direct capital injections into the banking system instead of buying up toxic assets. Lowenstein ends off the book with some very strong praise of Robert Rodriquez. Lowenstein notes that through September 2009 Rodriquez’s FPA capital fund returned 14.77% versus 10.35 for the S&P 500 annually over the past 25 years. This was the best record of any diversified mutual fund for the 25 year period.
To purchase the book on Amazon.com click on the following linkThe End of Wall Street
Disclosure: New FTC rules require me to state that I have a material connection because I received a free copy of this book to review.