Brian's Reviews > A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

A Colossal Failure of Common Sense by Lawrence G. McDonald
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's review
Sep 03, 2010

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bookshelves: nonfiction
Read from September 03 to 10, 2010

An interesting book that explains the 2008 financial collapse quite well, but from perhaps too limited a perspective. McDonald's viewpoint is as a Lehman insider, and he sees the collapse through a somewhat narrow window. While the failure of Lehman Brother's rests squarely on the shoulders of its management, we should not forget that the beliefs that Lehman management held was not very unlike the beliefs held by most of the other investment banks on Wall Street.

The book begs the question, how could the management of all these banks have ignored the signs of impending doom for so long. To this day the former CEO of Lehman blames the U.S. Government for the failure, not for failing to keep the banks anchored in reality, but for failure to bail Lehman out.

The biggest lesson to be learned from this book is, when somebody says "this time it's different", it is probably not different. And if they cannot explain just how it is different this time, then it surely is not different.

My favorite quote about the financial crisis is not from this book, it is related: "When the models say that there is a 90% chance that the risk is no more than $50 million, you must remember that this means that there is a 10% chance that the risk is no less than $50 Million."

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