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Editor’s Note: Welcome to the 18th review in our Get Paid to Read contest series! Last week Ross Brittain shared his thoughts on The Snowball: Warren Buffett and the Business of Life.
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This week we feature Too Big to Fail by Andrew Ross Sorkin, reviewed by Vasu Golyan. Vasu, an MBA from the Indian Institute of Management Indore, is a management consultant with a passion for reading.
Navigating the Financial Maelstrom:
A Forensic Look at the 2008 Crisis in ‘Too Big to Fail’
In the vast landscape of financial literature, few accounts stand out as vividly as Andrew Ross Sorkin’s “Too Big to Fail.” Chronicling the dizzying spiral of events during the 2008 financial crisis, Sorkin offers readers a rare, close-up view of the systemic breakdown that brought the global economy to its knees. For anyone who has ever wondered how we got to the brink of economic collapse—and how we were pulled back—this book is both a gripping narrative and a sobering study.
Sorkin, a distinguished financial journalist and the mastermind behind The New York Times’ DealBook, leverages his unparalleled access to key players to construct a narrative that is as detailed as it is dramatic. The book meticulously charts the trajectory of the crisis, from the fall of Bear Stearns in March 2008 to the frantic implementation of the Troubled Asset Relief Program (TARP) in October. What sets “Too Big to Fail” apart is its ability to translate complex financial maneuvers into a story that reads like a thriller, without sacrificing the technical intricacies that underpin the crisis.
The Strengths: A Microcosm of Macro Failures
At its core, “Too Big to Fail” is a tale of hubris, panic, and survival, played out on the grandest of stages. Sorkin masterfully captures the human element of the crisis, bringing to life the intense pressure and moral dilemmas faced by financial leaders and policymakers. Figures like Hank Paulson, the former U.S. Treasury Secretary, and Dick Fuld, the CEO of Lehman Brothers, are depicted not merely as cogs in the financial machine but as deeply flawed individuals navigating an unprecedented storm.
One of the book’s most significant achievements is its portrayal of the interconnectedness of the global financial system. Sorkin dissects the perilous state of financial institutions, revealing how the collapse of a single entity like Lehman Brothers could trigger a cascade of failures. He lays bare the fragility of the system, where credit default swaps, collateralized debt obligations (CDOs), and other complex financial instruments had entangled firms in a web of risk that few fully understood. The book delves into the mechanics of these instruments, providing insights into how their misuse and mismanagement contributed to the systemic crisis.
Sorkin also sheds light on the decision-making processes during the crisis, particularly the frantic weekend meetings and late-night calls that shaped the bailout strategies. The portrayal of Paulson’s desperate attempts to orchestrate mergers between struggling giants like Merrill Lynch and Bank of America offers a window into the ad-hoc nature of the government’s response—a response that often involved bending or even breaking traditional regulatory norms to stave off collapse.
The Weaknesses: A Narrow Lens on a Broad Crisis
While Sorkin’s close-up narrative is undoubtedly compelling, it also comes with limitations. The book’s focus on the immediate actions and perspectives of financial leaders can sometimes obscure the broader economic forces at play. For example, while Sorkin touches on the role of deregulation, excessive leverage, and the shadow banking system, these topics are not explored in depth. The result is a narrative that, while rich in detail, may feel somewhat superficial to readers seeking a deeper understanding of the root causes of the crisis.
Moreover, Sorkin’s reliance on insider access, while providing an unparalleled level of detail, also leads to a certain reluctance to critically examine the actions and motivations of his sources. The book often portrays key figures like Paulson, Fuld, and Jamie Dimon as beleaguered heroes doing their best in an impossible situation, rather than as participants in a system they helped create—and, in some cases, exploit. This lack of critical distance can make the book feel more like a behind-the-scenes drama than a rigorous analysis of systemic failure.
Technical Insight: The Anatomy of Financial Fragility
For readers with a background in finance or economics, “Too Big to Fail” offers a wealth of technical insights, albeit sometimes in the form of implied rather than explicit analysis. The book provides a stark illustration of the concept of systemic risk, where the failure of one institution can threaten the entire financial system due to interconnections through liquidity lines, counterparty risk, and the sheer size of the firms involved.
Sorkin’s narrative underscores the dangers of excessive leverage, particularly in the case of Lehman Brothers, whose reliance on short-term funding to finance long-term, illiquid assets created a precarious situation when market confidence evaporated. The book also touches on the role of moral hazard, as firms like AIG, emboldened by the implicit belief that they were “too big to fail,” took on risks that ultimately required taxpayer-funded bailouts.
While Sorkin does not delve deeply into the regulatory failures that allowed such risks to accumulate, his depiction of the crisis vividly demonstrates the need for robust oversight and the dangers of financial innovation outpacing regulation. The book implicitly critiques the fragmented regulatory framework in the U.S., where overlapping jurisdictions and conflicting priorities hampered a coordinated response to the crisis.
Final Verdict: A Must-Read with Caveats
“Too Big to Fail” is a tour de force of financial journalism—a book that succeeds both as a detailed chronicle of the 2008 crisis and as a cautionary tale about the fragility of the global financial system. Sorkin’s ability to weave complex financial details into a narrative that is both engaging and informative makes this book a must-read for anyone interested in the workings of modern finance.
However, readers should approach the book with an understanding of its limitations. While it offers an unparalleled close-up of the crisis, it leaves much of the broader context unexplored. For a more comprehensive understanding of the financial meltdown, one would need to supplement Sorkin’s account with other analyses that focus on the systemic and structural issues at play.
In the end, “Too Big to Fail” is an indispensable first step in understanding the financial crisis of 2008—a dramatic, detailed, and deeply human account that leaves readers both informed and, perhaps, a little uneasy about the stability of the system that underpins the global economy.