Too Big to Fail Book Summary

Book Summary

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Brief Summary

Long before 2008 and the financial crisis hit critical mass, there were warnings about the dangers of the risks being taken. Even as Wall Street attempted to decrease risk by trying new things, they only made things worse over time.

By 2008, the Big Five banks were in major trouble that in some cases could not be solved. Even as the financial institutions tried to find solutions to their issues, they could not successfully find investors or sales because there was no way to assign proper value to the different aspects of the financial companies.

Government intervention was required to save Wall Street and the financial system on a global scale. Not only did the government have to take over the mortgage companies Freddie Mac and Fannie Mae, but they also had to bailout the banking industry on the whole, which involved an infusion of cash in excess of $700 billion.

About the Author

Andrew Ross Sorkin is an American journalist and author. He works as the financial columnist for The New York Times and as co-anchor of CNBC’s Squawk Box. He founded Dealbox, a financial news service published by The New York Times. His book Too Big to Fail has been adapted as a Hollywood movie. He is the co-creator of the Showtime series Billions. He graduated with a Bachelor of Science from Cornell University.

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Too Big to Fail Book Summary Preview

In 2008, Wall Street was facing a financial crisis. It started with the smallest of the “Big Five” investment banks, coming forward to express their concern that they were about to either go bankrupt or be sold as a result of the subprime mortgage collapse.

If the smallest of the Big Five was in trouble, it was not hard to assume that the fourth largest could be next. With stocks plummeting, and all of the Big Five banks facing bankruptcy or worse, something needed to be done to protect an institution that had been in place since 1850.

In Too Big to Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System - and Themselves, Andrew Ross Sorkin breaks down the near-collapse of Wall Street and what was done to save the financial system following the collapse of the subprime mortgage market.

How Too Big to Fail breaks down to financial crisis that hit Wall Street and Washington

This is a look at the 2008 financial crisis that includes a look at the men and women who were at the heart of the problem. At the same time, we get details about what went wrong, what steps went into trying to avert a complete collapse of Wall Street, and the ultimatum that finally ended the disaster, as Washington made it clear that all the banks involved would take funds whether they were needed or not.

Not only do we learn about all the key players involved in both the crisis and averting the financial collapse, but we also see all the ways that Wall Street went wrong in their decision making.

The fate of the economy was in the hands of a group of fallible individuals

During the financial crisis in 2008, a handful of people, all of whom were capable of making mistakes, were in charge of the fate of the economy.

Things really began to unfold after a single phone call to the Lehman Brothers CEO, Richard S. Fuld Jr. from Henry Paulson the Treasury Secretary. Paulson was trying to alert Fuld to the news that the smallest of the Big Five banks was on the brink of bankruptcy.

Paulson was concerned that Lehman Brothers would be next. And it did not take long for Fuld to grow concerned as the bank’s own stocks began to drop.

In an effort to protect the bank, Fuld attempted to negotiate a sale to groups such as Bank of America and Korea Development Bank. The sale failed, and negotiations fell apart.

Lehman Brothers ultimately collapsed even with a warning from Washington

Even with the warning from Paulson, Lehman Brothers found itself collapsing without a sale. By September of 2008, Paulson determined that Lehman Brothers had to file for bankruptcy.

The goal was to show that the continual risks that Fuld and his Wall Street competitors had made came with consequences.

Prior warnings about the risks that he was taking went ignored by Fuld, who chose to have the firm borrow even more money over the years in an effort...