False Profits

Too Good to Be True: The Rise and Fall of Bernie Madoff by Erin Arvedlund (Penguin Group; $16.00; 336 pages)

In this book, financial journalist and first-time author Erin Arvedlund systematically maps out the intricate network of relationships within the Bernard Madoff investment fiasco.   Arvedlund expended a considerable amount of time and energy in developing this book.   She realized that Madoff was full of double talk and could not be delivering the consistent returns to his investors that they thought they were earning when she interviewed him for Barron’s magazine in 2001.   The interview resulted in an article entitled, “Don’t Ask, Don’t Tell.”   In response to Arvedlund’s questions, Madoff was typically evasive; he was off-putting when she asked him how his system for investing worked.

The fact that an immense Ponzi scheme was carried out by Madoff through his near-secret advisory activities escaped all but a few of the most Wall Street-savvy auditors.   This secrecy was coupled with the attitudes of his elitist-minded millionaires – there were enough greedy and willing people to feed the pyramid and maintain its immense demand for money over several years – and how many is anyone’s guess.

This reader sends kudos to Arvedlund for her calm, balanced and well-written narrative.   It delivers facts, figures and helpful insight.   Well recommended.

This review was written by Ruta Arellano.   Reprinted courtesy of Sacramento Book Review.   Note:  This trade paperback version contains a new chapter that updates events since the date of the original hardcover release.

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Spinning Wheel

Rough Justice: The Rise and Fall of Elliot Spitzer by Peter Elkind (Portfolio)

“(Elliot was) a muscular populist who wasn’t afraid to confront business institutions by punching them in the nose.   The MO was to keep things under wraps, announce them in a big way, then work with the press.   You lay out all the appalling facts, and they’re dead, because they’re in the market.  …When he really had the facts on somebody, it was like something out of Wild Kingdom.”

This is the story of the brisk rise and brutal fall of the Sheriff of Wall Street; the man who might have been the first Jewish President of the United States.   It is also a true morality play and what Spitzer himself called a Greek Tragedy.   In the end, it is a story about human strengths and weaknesses.

Elkind’s account (he was the co-author of The Smartest Guys in the Room) starts off promisingly, but he attempts to set up an odd comparison between Spitzer and John Kennedy.   It seems that Spitzer grew up under a demanding wealthy father who made his sons discuss major issues around the dinner table.   The elder Spitzer is made to sound like the second coming of Joe Kennedy.   But there are no signs that Spitzer was an intellectual like JFK (Spitzer made the law review at Harvard through a writing competition rather than on his grades).   If Elkind had called it correctly – and he never does in this account – he would have seen that Spitzer was the 2.0 version of Robert Kennedy.

RFK was the original liberal populist sheriff out to smash organized crime and tough in a manner that remains unusual for Democrat politicians.   Bobby Kennedy was always convinced of the moral rightness of his causes, something that appeared to be true also for Spitzer:  “We did not investigate Wall Street because we were troubled by large institutions making a lot of money.   We took action to stop a blatant fraud that was ripping off small investors.”

But one cannot write a quasi-biography of a subject’s life without giving the reader a sense of the subject’s flesh and blood.   Except for his sexual proclivities, Elkind fails to deliver here in presenting a portrait of Spitzer the man – for better or worse.   Instead, we have a newspaper reporter’s-style telling of Spitzer’s youth, education, unlikely political rise and early exit from the world of politics.   It is a shame and a major missed opportunity, as Elkind was perhaps the first person to get Spitzer to sit down for an interview after his short period of enforced exile.   But Spitzer made it clear that he is not a contemplative person, and saw little use in attempting to explain his actions to the author.

At the conclusion of Rough Justice, the reader is left with the same question posed by Lloyd Constantine, an aide and friend who had been with Spitzer from the start of his professional life, “I kept on feeling: what is wrong with this guy?   Who is he?”   Asked but not answered.

Take Away:   Elliot Spitzer comes off as a cardboard figure in this flawed account of a flawed man.

A review copy was received from the publisher.

Less Really is More

Street Fighters by Kate Kelly (Portfolio, 245 pages)

On the Brink: Inside the Race to Stop the Collapse of the Global Financial System by Henry M. (Hank) Paulson, Jr. (Business Plus, 496 pages)

“Bear Sterns, as it turned out, was only the first in a long string of financial firms to suffer mortal harm.  …By September 2008, just six months after Bear’s sale to J. P. Morgan, the investment banking industry had effectively ceased to exist.”   Kate Kelly

Kate Kelly’s book, subtitled The Last 72 Hours of Bear Sterns, the Toughest Firm on Wall Street, proves once again that less can be more.   This is a riveting, fly on the wall, account of the rapid demise of the once-powerful Bear Sterns investment firm.   Sterns was Wall Street’s fifth-largest investment bank with a market value of $25 billion dollars – with a “b.”   It was virtually given to J. P. Morgan for the fire sale price of $236 million – with an “m.”

Kelly’s book, an expansion of a three-part series of articles that she wrote for The Wall Street Journal, tells us how this all came to pass in less than half a week in March of 2008.   These were mad-crazy times, the beginning of this country’s fiscal implosion and she covers it in a manner that brings to mind Robert (Bob) Woodward’s reporting.   As with Woodward, Kelly interviewed hundreds of individuals who were present at the meetings and events described here and quoted them without attribution.   But in some instances the reader can clearly tell who the source was, as in cases where an underling criticizes a supervisor.   However, Kelly’s style is smoother and less choppy than Woodward’s first drafts of history.

Street Fighters has 229 pages of actual content and it appears to be just right.   The typical reader will finish the true tale thinking that everything essential was told and little was left out.   There’s both a new preface and a prologue to the trade paperback edition for those who don’t choose to supplement the account with Google searches.

That the length appears to be just right is not something that can be said of On the Brink, the loveable Hank Paulson’s 496 page account of the U.S. and the world’s financial meltdown.   If the mention of 500 pages doesn’t make the point, consider that it takes 13 full CDs to contain the unabridged audiobook version.   Apparently no editors were employed to deliver this effort.

What’s mind-boggling, and often frustrating, about Paulson’s account is that he appears to cover every meeting, every phone call, every thought over a period of weeks and months with dozens of important figures.   Yet he tells the reader that he does not maintain briefing papers, nor ask his staff members to do so, and does not keep records (including e-mails) other than phone call and meeting logs.   From this, he’s recreated virtually everything that happened from an apparently perfect memory – or could it be that recordings were used?   It doesn’t really matter.   It’s just that there is so much detail that this reviewer was worn out less than a third of the way through.

There are also some contradictions apparent in Paulson’s telling.   He gives us several of his seemingly expert opinions about the financial events of the last two years before reminding us that, “I’m not an economist.”   This has the same effect as someone writing about brain surgery and then stating, “I am not a physician.”   He also tells us that he’s not a sentimental person, but he writes of the often-criticized Tim Geithner like a father writing about his favorite son.   One half expects to read that Geithner solved the financial crisis by walking on water.

For those looking for an explanation as to why the U.S. government saved or bailed out some companies but not others, the explanation is not here.   Why did the government ensure that Morgan purchased Bear while permitting Lehman Brothers to fail?   All that can be said is that Paulson provides a few non-explanatory explanations.   In the end they just do not add up.

And lastly, as Bob Seger might have warned, what to leave out is just as important as what to leave in.   Kate Kelly in her nonfiction account nailed it.   Paulson was not even close.

Take Away:  Street Fighters is highly recommended.  

A copy of Street Fighters was purchased by the reviewer.   A copy of On the Brink was provided by the publisher.