Fool’s Gold by Gillian Tett – From award-winning Financial Times journalist Gillian Tett, who enraged Wall Street leaders with her news-breaking warnings of a. At some point during Gillian Tett’s absorbing year gallop across the The sub -title of Fool’s Gold panders to this, suggesting “unrestrained. Gillian Tett, who oversees global market coverage for The Financial Times, offers some of each. In “Fool’s Gold,” she describes how a small.

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They had parties, we got the hangover

I think given the complexity of the finance involved she goes a great job in breaking this down and making it accessible. They felt that CDOs were undeservedly being blamed; it wasn’t the instruments themselves that were at fault, but the people using and misuing them.

See all reviews. A concept is born, but much like the inventors of Zyklon B who saw their creation misused by the Nazis, so we have a similar situation with enlightened research applied by unenlightened practitioners. When the new dawn actually broke, the very next day, it was with the news that a crisis was erupting at a hedge fund with close links to Bear Stearns – one of the early markers of the great unravelling.

First, by creating new products like derivatives – CDSs credit default swaps and CDOs collateral debt obligations based on all sorts of credits and mortgages; secondly, by putting these products in off-shore and off-balance vehicles, like SIVs Structured Investment Vehicles ; thirdly, by financing long term loans with short term debt.

Fool’s Gold | Book by Gillian Tett | Official Publisher Page | Simon & Schuster

Derivatives are the same – it’s not the tools at fault but the people who used those tools. Those that stayed watched as the credit derivatives they invented took off, sometimes baffled by the risks other banks seemed to be taking. Feb 18, Gumble’s Yard rated it liked it Shelves: It is ironic that the creators at JPM later more or less disowned their creation and had the good sense to cut back their subprime debt exposures unlike their hapless counterparts at Bear Stearns, Lehman Brothers, Merrill Lynch and Citibank.

The reasoning behind it was that the US housing market would in any case not go down. If you are at all interested in the how we got into this current financial mess, Tett’s book is a good place to start.

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Morgan created commoditized credit default swaps in the early s as a way to move risk off the company’s books, freeing up capital for lending and investment that otherwise would need to be held in reserve.


The JP Morgan team, whose evangelism for financial innovation went so horribly wrong, are portrayed as stunned and chastened; Blythe Masters is “livid at how bankers have perverted her derivatives dream”.

Treasury Paulson’s and Fed. Visit our Help Pages. She became renowned for her early warning that a financial crisis was looming. The credit instruments were perceived to be so technical and complex that hardly anyone outside the small group that dealt with them made any attempt to know about them, let aside to understand them. It reads like a piece of journalism; author Gillian Tett is a Financial Times columnist.

Her angle here is that CDS and derivatives were designed by her main characters not as “financial weapons of mass destruction” but as perfectly legitimate instruments for dispersing risk and were employed with no clear direction by the major banks.

Morgan team that played a pivotal role in the development of credit derivatives and the picture painted of that bank and that team is far from what I had expected from said sub-title. Tett, anthropologist and editor of the Financial Times, explains how a small team at J. Did those banks know more than they did? Learn more about Amazon Prime. They then paid AIG to assume the risk of the mortgages underlying those securities going bad. But among the drinking, nightclubbing and fist-fights lay a more serious purpose – to assess the possibility of building a business around the new-fangled concepts of credit derivatives.

This book is notably lacking in hysterical jeremiads, whether against Richard Fuld, Henry Paulson, Barney Frank, Tim Geithner, and anyone else you would care to name. The second jamboree took place on 11 Junein Barcelona, when industry body the European Securitisation Forum held its annual meeting and celebrated the most lucrative year in history for investment banks.

She has an awareness that her reader may need help navigating the jargon of the financial world, and so makes an effort to break down and explain the terms in a simplistic manner. Worse, we now have a president that wants to roll back the laws that corrected the problems brought about, roll back regulation and the power of regulators, and set us up for another massive cost to the tax payer. At times it does start to get bogged down in details and far too many names of this player or that player, but I think anyone would have had a hard time untangling this spider’s web of a story and then retelling it to outsiders in a coherent fashion.

The story follows a team from JPMorgan, who invented some of the credit derivatives that brought down the banks in This is the second book I’ve read on the banking crisis and it won’t be the last.

Fascinating, she also probed the consequences of disconnecting finance capitalism – money exchange – from the people it is meant to serve. The end result is hubris and eventual catastrophe.


Morgan leaders who so skillfully steered their bank away from the wild excesses of others sheds invaluable light not only on the untold story of how they engineered their bank’s escape from carnage but also on how possible it was for the larger banking world, regulators, and rating agencies to have spotted, and heeded, the terrible risks of a meltdown.

They appear unable or unwilling to removing or ringfencing the environment within which this greedy group of bankers mader obscene profits to the considerable and long term detriment of most others. Will that now change? The ruthlessness and carelessness will remain my memories of this book. Sep 15, Randy rated it it was amazing. What social anthropology teaches its adherents is that nothing in society ever exists in a vacuum or in isolation.

This helped the banks to be opaque about how the derivatives were modelled and priced as opacity leads to hefty profits. Tett, a financial journalist, had completed a PhD in anthropology and used those skills to understand the ‘on the ground’ culture of the bankers and financiers in the derivatives market.

The Fed chairman was against the regulation of derivatives because he believed that they made markets more efficient. Morgan merged with Chase Manhattan, the change in culture led many of the team to leave JP Morgan Chase for other banks or hedge funds.

I am lucky if I can manage to keep my checking account balance. Frankenstein type scenario where some financial engineers with good albeit slightly greedy intentions created a monster that overpowered its creators and went on to wreak global financial terror. But, they used them in the wrong way. Tett follows specific individuals who developed the financial tools that facilitated the crisis, but while she fleshes out their individual motivations and personalities, ultimately we get the sense that it is the wider culture of finance, rather than individuals that should be blamed for the crisis.

I found the book to be a good read, well paced although I knew what was coming at the end. One person found this helpful. Goodreads helps you keep track of books you want to read. A little technical at times but quite readable and understandable. She pulls back the curtain on a closed, unaccountable world of finance’ Will Hutton, Guardian In the mid s, at a vast hotel complex on a private Florida beach, dozens of bankers from JP Morgan gathered for what was to become a legendary off-site meeting.

This one focuses on what the pros were doing.