A Colossal Failure of Common Sense Quotes

“When you buy your bond, you are given two key facts—the amount of interest you will receive annually and the date your bond will mature. On that maturity date you will be given your money back. All”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“Corporate bonds, Treasury bonds, and municipal bonds all represent nothing more than a loan—or, if you wish, debt—for which the lender will be paid an interest rate,”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“Always take a long look around any poker table for the sucker. If you can’t find him, it’s probably you.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“commercial paper is short-term money, loaned out for thirty to forty days or less. This market is used by the biggest and best blue-chip companies. Commercial paper is the quickest, cheapest, and easiest way for them to raise a fast loan that is not regulated by the SEC. As”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“The credit spread refers to the difference between Treasuries, which were paying around 4.5 percent, and the yields of corporate bonds and the mortgage-backed securities, which were probably around 7 to 8 percent.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“value at risk, a technique used to estimate the probability of portfolio losses based on the statistical analysis of historical price trends and volatilities. It measures the worst expected loss under normal market conditions over a specific time interval at a given confidence level. Which means it measures both fear and optimism.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“qualified special purpose entities, or QSPEs.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“the Grand Cayman connection provided three big advantages to a firm like Lehman Brothers, which was trying desperately to compete with the biggest banks on Wall Street. The first was entering false profits from the “sale” onto the balance sheet. The second was receiving all the coupon payments from the derivatives they still held in the trusts. The third was that the Financial Accounting Standards Board (FASB) required them only to put aside 3 percent of capital, a tiny amount, to cover any losses in an offshore trust.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“Never blow your powder too early,” he said. “Start nice and slow, nice and low. Get the feel of the market, get centered, make sure you got a ton of ammunition, and don’t quit too early. Never do that. When they’re running against you, keep going, because they’re gonna turn. And the split second they make that turn, hit it, buddy, hit it real hard. Because that’s when you’re gonna fucking win.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“When things can’t get any worse, they always do, and when they can’t get any better, they always do.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“The difference between these CLOs and the mortgage CDOs was the difference between a raft of corporations and a raft of homeowners.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“credit spread. This is a measurement between the yield of U.S. Treasury bonds, which carry the smallest possible risk, and the yield of a publicly traded corporate bond.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“borrower dollars”—dollars that weren’t quite real because they had been borrowed from banks and credit card companies by the consumers.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“credit default swap (CDS). This is nothing more than a bet—for instance, that a mortgage company will go broke and its bond value will sink to, say, 4 cents on the dollar.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“The beauty of issuing convertible bonds by a corporation is the ability to borrow money and pay a lower coupon.”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers

“Never lose sight of the critical difference,”
― Lawrence G. McDonald, A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers