American International Group, Inc (Subject)

I have to admit that I'm only 75% done with the book. However, I can say that I'm a little disappointed by it. I thought a reporter would be a good author and the writing is clunky and not objective (in my opinion). I will definitely finish the book, and I have learned a bit, but I just don't love it.

And now I've finished it, but I'm leaving what I previously wrote as I still agree with it. I'm glad I read it but I might go look for other books on the financial crisis of 2008 to see if there is something I like better. ( )

Hard to know what to make of this book, which presents Goldman Sachs as a hero telling truth to the market and Eliot Spitzer as a villain, with Hank Greenberg as his victim. Dowd doesn’t explain much about Gen Re, the transaction that led to Greenberg’s ouster from control of the incredibly successful insurance company he’d built, but even Dowd has to admit that it was an out-and-out fraud designed to fool investors and regulators about the profitability of AIG’s trading partner, and that anyone apprised of its details would have known that. Dowd presents evidence both ways, but clearly thinks that Greenberg didn’t really know the facts of the transaction, despite the fact that the reason to laud Greenberg is that the man obsessively monitored risk and insisted on knowing every aspect of AIG’s business. The problem, and the real cautionary tale, is that Hank Greenberg’s presence was used as a substitute for actual accounting risk control. Can you call a man a success when he builds a company whose assets and liabilities are greater than those of many countries and that, with him gone, cannot accurately tell you what’s on its balance sheet? I think that question answers itself.

Dowd’s condemnation of Spitzer suggests that outright fraud revealing, at the absolute minimum, an absence of a corporate structure that could detect and prevent such frauds, should have been written off as inconsequential because AIG was too big to punish. He also argues that Spitzer became megalomaniacal in treating big banks like criminal enterprises, except that they were criminal enterprises that succeeded in looting the economy and are still going. There’s plenty of blame to go around, and Dowd gestures at that in the end, though he still maintains that Goldman was just exercising good business sense when it demanded to be paid par (face value) for its now-nearly-worthless holdings. He suggests that the government had few choices but to pay that rate (even as he points out that it would have been possible for AIG to refuse Goldman’s collateral calls and litigate it out—there’s an adage, which he repeats, that there’s a courtroom on every corner in New York), but I’m not nearly as sure and I just don’t trust his judgment by that point. However, Dowd’s more general conclusion is easy to agree with: that repealing Glass-Steagall, which separated commercial and investment banks and thus prevented the kind of disastrous overleveraging we saw in the runup to the crisis, was an enormous and foundational mistake.

Also, and this is just a pet peeve, where was the editor? There were three misused homonyms, each of which is plausible but wrong (took the reigns, said his peace, and into the breech). ( )