The Greatest


Too Big To Fail

By: Andrew Ross Sorkin

Andrew Ross Sorkin is an American author born in New York City, New York. He has written only one book, his New York Times best seller Two Big To Fail, along with a talking part in a cinematic version of the volume.

An Economy Built for Failure

By: Drayke Choi

Between the winter of 2007 and spring of 2008, the United States underwent a national and global financial crisis, which to many economists considered this economic crash the worst crisis since the Great Depression beginning in 1929. Andrew Ross Sorkin covers the financial crisis through various figures who fought to not only save the american economy, but to save their own asses, in his work Too Big To Fail. Sorkin’s piece reflects the flaws conspired within the economic powerhouse that is Wall Street, in which he states, “At its core Too Big To Fail is a chronicle of failure- a failure that brought the world to its knees and raised questions about the very nature of capitalism”(7), displaying the selfish behaviors of the CEOs and the big banking industry that caused the devastating crash.

The first quarter of Too Big To Fail begins with the following of the chief executive officer, of JP Morgan investment banking firm, James Dimon. Dimon had been invited to an urgent meeting held at the Federal Reserve Bank of New York to discuss that Lehman Brothers, the fourth largest bank on Wall Street, was on the brink of a major collapse, virtually destroying the company. CEO’s of some of the largest corporations within Wall Street and a series of executives, along with Dimon, were asked of by the Federal Reserve to come up with a plan to save Lehman Brothers. The CEO of JP Morgan immediately places a conference call to his management team where he states the firm is obliged to formulate an arrangement for the circumstance that Lehman Brothers goes under, in which the company must file for bankruptcy. The focus then switches to the U.S. Secretary of Treasury Hank Paulson, who is phoned by Jamie Dimon stating he has increased his initial offer of two dollars a share to a staggering ten dollars to buy out Bear Stearns, an investment firm on the verge of collapsing such as Lehman Brothers. Paulson, along with companies Bear Stearns and Lehman Brothers, felt that the american economy was about to begin a large economic crash in which he states, “All in all, the situation had become Paulson’s worst nightmare: The economy had turned into a political football, his reputation was on the line, and he was stuck playing by Washington rules”(39). Public outlook on the situation occurring on Wall Street and the financial sector sensed a political sentiment that was seen as a government “bailout”.

Quarter two involves the back and fourth encounter of head CEO Richard Fuld of Lehman Brothers and Hank Paulson. Paulson feared that Lehman Brothers did not posses the the amount of capital necessary to protect against the sudden market drop occurring upon the company’s stock holdings. Thus, Paulson encouraged Fuld to raise excessive amounts of funding to keep Lehman Brothers safe from any forms of collapsing. Although Fuld concurred with Paulson about the need for raising capital, he did argue that the company was under attack by “short-sellers”. However, Paulson argued that Fuld used the idea of short-sellers as an excuse that masked the real problem, which was an ongoing corrupt process within Lehman Brothers. Fuld was extremely tied close to the company he ran, even the executives and brokers noticed as they stated, “Dick Fuld’s Lehman. Lehman is Dick Fuld . . . You’ve got a management that wears the corporate logo on its heart . . . It’s got to hurt enormously”(125). The Secretary of Treasury and his staff composed a classified blueprint for how to deal with by any circumstance that Lehman Brothers or another large corporation on Wall Street or an investment firm would begin to fail; all at once. Back at Lehman, Fuld had begun to feel the heat of a suspecting crash and had seeked out alternative reaches to protect the safety of the company. Fuld reached out to a Korean bank, persuading the firm to invest into Lehman stating that the company was on verge of huge profits within the next two quarters. News of this encounter spread across Wall Street and the mainstream news on what was supposed to be a secretive agreement. Along with the blown up news, firms that distributed short term loans so that Lehman could pay back their investors started to demand large collateral on the company, which only increased the trouble the company found itself placed.

At quarter three of Too Big To Fail, Lehman Brothers began to experience the expected economic downfall and was steadily collapsing. At the end of the week, Fuld had to report the earnings of the end of the quarter and would have to report Lehman’s loss of $3.9 billion. Paulson. U.S. Secretary of Treasury spoke to Fuld demanding that he speak to the CEO of Bank of America Greg Curl. Curl agreed to look over Lehman’s reports and was keen on striking a deal with Lehman Brothers, however, he asked that both companies sign a contract that guaranteed a future bailout if necessary if the market were to crash again. Bank of America came up with this contract in order “to save themselves from their own worst excesses, and, in the process, save Western capitalism from financial catastrophe”(311). This contract was set up with the intention to prevent any future issues revolving around a crash. Again, a second meeting with important executives were gathered to meet at the Federal Reserve Bank in New York to discuss the plan to save Lehman Brothers from crashing. Tim Geithner ran the meeting and divided the executives into three categories that would attempt to solve how to finance the failing investment firms, such as Lehman Brothers, without having to use government bailout money, which is funded by taxpayer money. Lehman had come up with the spin-off bank proposal, which was a plan that would create an independent company through the sales of shares of an existing business of a parent division.

Quarter four ends off with Tim Geithner establishing the solution to save the large investment firms. Along with Lehman Brothers, companies such as AIG, Goldman Sachs, and JPMorgan were also upon the verge of the collapse and were adjusted into the solution Geithner had set up with the executives at the Federal Reserve. AIG was the company that suffered the most losses reporting an amount between 30 billion dollars to 40 billion dollars. Hank Paulson stepped into play with his TARP plan which stood for Troubled Asset Relief Program. This was a three-paged bill that planned on using 700 billion dollars of government money to bailout these companies that were so detrimental to the american economy. It was believed that “it was a watershed event: The two biggest investment banks in the nation had essentially declared their business model dead to save themselves”(483), and only the United States government was able to save the companies in the process of collapsing on Wall Street.

Sorkin demonstrates the connotation of his title Too Big To Fail when detailing the specific characteristics of both the companies responsible and the brokers and executives who ran the corporations. His thesis revolves around the premise that big business, especially fortune 500 companies, is aided by the american government because the companies are extremely vital to the american economy, and failure to “bailout” these large corporations will lead to a ripple effect throughout the economy. Referred within Sorkin’s work, Dave Bove, a banking analyst at Ladenburg Thalmann, expressed, “It’s . . . not in the interest of the U.S. Government for Lehman to fail . . . You have to believe, although I can’t tell you this is true, that Lehman has been talking to the Federal Reserve of New York, to Ben Bernanke, probably to Hank Paulson, because they don’t want this company to fail”(244). His testimony indicates that the government doesn’t necessarily desire to bailout corporations of excessive size, money, and power in desperate situations, but is almost required to use taxpayer money to instill the safety of these corporations, which in turn saves the american economy. If large companies on Wall Street fail, those same corporations that rely on it for portions of their income might also be brought down, and a number of jobs would be eliminated, increasing the already devastating unemployment rate, which at that time boosted from 4.9% in mid 2008, to an inflated number of 9.4% at the end of 2009, the epicenter of the crash that began in 2007. Sorkin’s significance behind his title Too Big To Fail demonstrated an idea that the government was responsible for bailing out companies such as Lehman Brothers because they almost controlled the economy in areas such as loans, mortgages, start-ups to up and coming companies such as the ones in Silicon Valley, and most importantly mortgages on houses, which was one of the larger reasons for the eventual market crash, due to banks subsidizing high risk loans to people who could afford to pay “cash up front”, and avoid credit score checks. Unfortunately, the american government, authoritated by the Bush Administration, would provide bailouts to protect creditors against losses and enable managers to retain their high wages and bonuses. Sorkin’s analysis on the fraudulent activities of both the government and the companies involved demonstrate the tenacity and illegal motives that was meant to cover their losses and still walk away with a large check.

Author Andrew Ross Sorkin is an american journalist, along with being the co-anchor of Squawk Box on CNBC, and is apart of both HBO and Showtime specials and TV shows pertaining to economics and money. Sorkin was born in New York City, New York, the epicenter of economic affairs, and attended Cornell University. Too Big To Fail is his only notable work in publication in the author’s sphere. In his volume Too Big To Fail, Sorkin does not demonstrate an independent bias towards the event of the financial crisis, but rather gives an in depth narrative of each of the figures, which give their point of view regarding the situation, and how they chose to go about it. Not only is his position unbiased, he protects many of the identities he encounters when interviewing for the tell-all, for which he clarifies, “Given the continuing controversy surrounding many of these events- several criminal investigations are still ongoing as of this writing, and countless civil lawsuits have been filed- most of the subjects interviewed only took part under the condition that they not be identified as a source”(xi). The time period in which the author wrote the book in was between the years of 2009 and 2010, right after the collapse had occurred. This gave the author an overview as to what occurred during the prime of the market crash, and was able to interview those involved within the series of coverups and illegal trades. To most americans, those who worked on Wall Street were seen as criminals who stole billions from the american people and kept it all for themselves, yet Sorkin captures the real truth behind those who work in the economic fields and found their tenacious activities almost beneficial to keeping the american economy afloat.

Too Big To Fail is seen as a factual representation of the events both prior and following the market crash of 2007, according to the politically moderate new sources The Economist, which distributes anonymous content on issues regarding the financial area of american government, and former Lehman Brothers broker Ted Sturtz. According to The Economist, Sorkin’s volume is seen as, “For the most part… “Too Big To Fail” is too good to put down. It does not profess to examine every issue exhaustively. It is the story of the actors in the most extraordinary financial spectacle in 80 years, and it is told brilliantly”(The Economist). The Economist examines Sorkin’s work as a visual elucidation to the enthralling restoration of the drama revolving around the panic of the companies threatened by foreclosure or buy outs, a federal government which feared the amount of taxpayer money had to be distributed to the large investment banks that reported so many losses, and also the pressure coming from the average american worker who distrusted the certain “antic” being performed on Wall Street. Ted Sturtz adds to the credibility to Sorkin’s work as he confides within his published article, the New York Journal of Books, the amount of truth Too Big To Fail displays. He inquires, “As a former Lehmanite, I can vouch for the accuracy of much that I read. I also noted a smattering of errors. None of these were significant enough to cause particular annoyance or substantially undermine the veracity of his account”(Sturtz). Judging from his statement, Sturtz implies that although there were present inconsistencies within the tell-all, the broader interpretation was astoundingly accurate to the point that the non-factual pieces did not create any discredit. Although Too Big To Fail demonstrated certain inconsistencies within itself, the main points and events were credited as facts and the interviews that took place did not create any fictional evidence regarding the events that happened.

This book displays a large sense of integrity and honesty throughout each chapter and person due to the fact that they revealed the entire events, in full detail, regarding their involvement within the crash. Sorkin utilizes the first hand accounts in an effective way by using the stories these brokers and head CEOs to discover how and why they did the actions they committed, regardless if illegal, to save their companies, the american economy, and most importantly their bonuses.

The questions that Too Big To Fail inquired were of the intentions and reasons as to why each of these executives took the actions the committed through 2007-2009. Sorkin identifies that an excessive amount of corruption was taken into play within the companies, specifically the actions took by executives, the board of directors, and most importantly the CEOs of these large investment firms and hedge funds. Sorkin answers this question by interviewing the men and women responsible for these corrupt actions and also hid the identities of several of them so that he may get hold of the true events, and not partial ends of the truth. Sorkin’s Too Big To Fail is a point of view analysis of several figures within the executive board of Wall Street, specifically pertaining to the companies that were under the threat of collapsing and filing for bankruptcy such as the Lehman Brothers. He identifies both the financial, capitalist side of crisis involving the CEOs and executive most responsible for the influence they instated within big banks and hedge funds, and also the political side in which treasury officials planning to solve the issue of the financial collapse. Sorkin uses first hand accounts and interviews as he delves into the true story of each side Wall Street in New York and Washington and how it came to solve the financial issue involving the economy.

[1] Foley, R. B. (2009, December 03). Too Big To Fail, By Andrew Ross Sorkin. Retrieved May 23, 2017, from http://www.independent.co.uk/arts-entertainment/books/reviews/too-big-to-fail-by-andrew-ross-sorkin-1833641.html
[2] P. (2009, November 14). Rational Irrationality. Retrieved May 23, 2017, from http://www.nytimes.com/2009/11/15/books/review/Barrett-t.html
[3] Book of revelations. (2009, October 31). Retrieved May 23, 2017, from http://www.economist.com/node/14743362