Panic
Author: Michael Lewis 2009 365 pp
My rating: 3.5*
Started May 25 2009, Finished May 31 2009.

This book contains selected articles from a variety of authors and sources covering the boom and bust arcs of the last four major financial panics: the October 1987 Wall Street Crash, the 1998 SE Asia financial implosion, the bursting of the internet stock bubble in 2000 and the 2008’s credit crunch (the last of which, unlike its predecessors, is still unresolved with no recovery as yet to be able to look back with relief from). While book suffers somewhat from a lack-of-effort, slapped-together, greatest-hits feel and the disparate nature of the selections prevent each section from building into a coherent unit, I still found it a useful and enjoyable read, particularly the later two sections. Lewis’ pieces consistently stand out as being more deliberative and humorous. The theme of the book seems to be that each crisis starts with a period of near-boundless optimism (“we’ve entered a new paradigm“) following by a shattering return to earth and a resolve that “we’ve learned our lessons and will never let this happen again” which is quickly forgotten or justified away.

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On opening the morning after the ‘87 crash GE’s bid/ask spread was 45/65.

It was striking how little control we had of events, particularly in view of how assiduously we cultivated the appearance of being in charge by smoking big cigars and saying fuck all the time. (38)

The chapter from Lewis’ book about a meeting between Healtheon (Jim Clark’s post Netscape internet venture) management and Wall Street investment bankers is hilarious in a Bonfire Of The Vanities sort of way. The bankers spend the entire session in a state of awed befuddlement, no more so than after hearing the CIO’s incomprehensible explanation of the software development details of the Healtheon’s planned website when theWall Streeters are stunned to silence except for one who impresses his peers by using the word “platform” as tech jargon way when asking a simple question .

And that in the way is the point. If you can’t put one over on Lou Dobbs, who can you put one over on? (240)

Prescient passage from a 2002 Lewis article written after the tech bubble crash: … “Eliot Spitzer gets credit for cleaning up Wall Street, which neither he nor anyone else will ever do. (Just wait till the next boom.) “ (244)

A 2008 NYT article by Roger Lowenstein explaining how the ratings agencies contributed substantially to priming the credit bubble by assigning triple A ratings to CMOs and CDOs based on subprime loans is quite a revelation in that almost every aspect of the process seemed tilted towards inflated ratings.