Financial Origami: How the Wall Street Model Broke

by Brendan Moynihan

An in-depth look at the failure of Wall Street's "proven" financial models Origami is the Japanese art of folding paper into intricate and aesthetically attractive shapes. As such, it is the perfect metaphor for the Wall Street financial engineering model, which ultimately proved to be the underlying cause of the 2008 financial crisis. In Financial Origami, Brendan Moynihan describes how the Wall Street business model evolved from a method to transfer risk into a method for manufacturing risk. Along the way, this timely book skillfully dissects financial engineering and addresses how it's often a mechanism to evade regulatory constraints, provide institutional investors with customized products, and, of course, generate revenue for financial engineers. With the collapse of Lehman Brother the Wall Street business model effectively broke. But there are many lessons to be learned from what has transpired, and Financial Origami will show you what they are.

Genres: Finance

192 pages, Hardcover

First published February 16, 2011

Reviews

[Hugo Fostin Hokianto · Rating 4 out of 5]

To say the least, this is one of the books out there that explains how wall street and the motive of money creates exploits from the regulations that causes crisis in the first place. The introduction, the factors described in the book, indirectly explains how this all contributed to a major crisis that results in a loss-loss situation for everyone.

Small note to be added, although this book heavily focuses what causes the crisis (by wall street), some of the explanations cannot be understood without prior knowledge to the regulations (Dodd-Frank act for instance) and a basic knowledge of finance, especially those who do not live or familiar with US and how wall street works (or even what it is). This small note is given for everyone who is not familiar to the topic said, and although this is probably useless, I might have to tell it right here firsthand.

In short, it's a must read for everyone, mostly for people who study finance (or bank/investment related subject), for getting into technical side of why such crisis happens and how this all unravels to the decline, and for investors, for the book gives a little warning/note to always be aware on what are you investing, especially things that might seem 'good' by the public.

Cheers to the author for giving a decent explanation about the topic in the book!

[Liam · Rating 3 out of 5]

"What Wall Street calls financial engineering, I call Financial Origami, the art of paper-folding that uses a few, basic folds to shape pieces of paper into decorative models. Wall Street takes a few, basic pieces of paper stocks, bonds, and insurance contracts and folds their attributes together to make 'new products,' sometimes to skirt regulations, sometimes to meet investor needs, and always to boost profit." (xiii)

"[I]n January 2008 only 12 companies in the world were AAA rated, yet 64,000 structured products were." (85)

"The low volatility environment after 2002 left little risk to transfer or assume, so Wall Street began to manufacture it." (98)

[Ben · Rating 4 out of 5]

A fascinating read. Probably the fairest description of the complexities of the recent financial crisis that I have seen. The book does a good job of laying out the array of people, companies, incentives, and events that transformed Wall Street from the network of partnerships of pre-1971 to the modern incarnation that was at the center of the crisis.

My only word of caution would be that parts of it do get quite dense and involved. I would imagine that the detailed discussions of derivatives and financial products might be really boring and/or confusing for someone outside of the financial industry. Still, well worth it for the overall analysis.

[Ryan Teoh · Rating 4 out of 5]

I like: The simplicity of its narrative.
I love: The way the chapters are organised :)