“A Colossal Failure Of Common Sense.” Now out in hardback.
By Lawrence G McDonald, the hard-driving Lehman Brothers trading Vice President, and the #1 New York Times bestselling author Patrick Robinson, the man who wrote Lone Survivor for the Navy SEAL Marcus Luttrell.
Direct from the heart of Lehman Brothers, the bank that smashed the world economy, comes an incredible blow-the-lid-off account of the greed, the misjudgements, the dreadful stupidity of men who should have known better. Revealed by a man who was there, the eyewitness, Larry McDonald. Anyone, laymen or expert, can understand the crucible of a Wall Street trading floor by reading “A Colossal Failure Of Common Sense.” This is a black box of secrets. And now Larry McDonald rips the lid off.
Author’s Note
America has two distinct groups of people; Wall Street and Main Street – the financial plumbers, and those who have only the most basic notion of the ebb and flow of economics. Wall Street, with the
collapse of Lehman Brothers in 2008, was the epicenter of the worldwide financial crisis that brought the global economy to its knees.My objective in writing “A Colossal Failure of Common Sense” was twofold. First, to show Main Street how markets really work. Second, to provide a crystal clear explanation of why the fabled merchant bank, Lehman Brothers, met with such a swift and brutal end. The lessons are important, not just to warn of such disasters in the future. But ultimately to provide a beacon, to help us serve Main Street better.
A Colossal Failure Of Common Sense – Jacket Copy
They stand alone – the zillion-dollar questions of the financial crisis : What the hell happened at Lehman Brothers? And why was it allowed to fail, with aftershocks that rocked the global economy? In this news-making, often astonishing book, a former Vice-President of Lehman gives us the straight answers – right from-the-belly-of-the-beast. Larry McDonald is the first senior Wall Street trader ever to write such an exposé – revealing at last the culture and unspoken rules of the game like no book has ever achieved before.
“A Colossal Failure of Common Sense” is a human story of McDonald’s rise from a Massachusetts project, to the New York headquarters of Lehman Brothers, home to one of the toughest trading floors in the world. He posed as a pizza delivery man to get past receptionists, to score interviews at brokerage firms. He peddled frozen pork chops, door to door, to hone his sales skills, desperate to realize his dream of working on Wall Street.
We get a close-up view of the other participants in the Lehman collapse, those who saw it coming with a helpless, angry certainty. We meet the Brahmins at the top, whose reckless, pedal-to-the-floor addiction to growth finally demolished the nation’s oldest investment bank. The Wall Street we encounter is a ruthless place, where brilliance, arrogance, ambition, greed, and all the human traits, combine in a potent mix that sometimes fuels prosperity, but sometimes destroys it.
McDonald’s gripping story of the firm’s death spiral is a modern-day thriller, studded with incredible, insider revelations no one else knows, or would dare reveal.
The collapse of Lehman Brothers was no surprise and didn’t have to happen. In fact, CEO Richard Fuld and President Joe Gregory were confronted with warnings on three occasions — starting as far back as 2005 — that the property market, on which they were betting the ranch, was teetering toward collapse. Fuld and Gregory turned their backs each time.
McDonald paints a vivid picture of life inside Lehman in “A Colossal Failure Of Common Sense,” where the isolated and reclusive chief executive ‘reigned’ in his sumptuous 31st floor office, accessible only by private elevator. From this Ivory Tower so much of the firm’s brightest talent was driven out of the door. The full significance of the Lehman bankruptcy remains to be measured. But this much is certain: it was a devastating blow to both America and the world beyond. And it need not have happened. This is the story of why it did.
Larry, My husband and I read your book. It was quite good and we learned a lot about the inner workings of wall street. We were one of the unfortunate people who had a Lehman Bond and lost it all. No problem, it was only our retirement. We can’t understand that there is nothing left, we thought a bond was safe. It makes one totally distrust wall street. It seems Wall Street runs on a money making fever there that spreads without regard to those of us on the bottom rung of the ladder. Those salarys and bonus’s are mind boggling. Whose money is it anyway? Is it really yours to take? I just don’t know anymore……..A collossal failure of course, but also a collossal disappointment and mistrust….
Larry, I finished your book yesterday and want to say a word of thanks to you (and Patrick Robinson). I am a small investor, age 63, who might not otherwise have had a good way to understand either the day-to-day activities of a Wall Street investment bank, or the nature of the derivative instruments that weakened our economy. I greatly appreciate your detailed explanations, especially since they are hung on the “hook” of an interesting personal narrative that helps make them understandable. The conversational tone of the book is a great success, I think, as are the earmarks of high tragedy: the hubris of the king, the disintegration of the social order, the turning of–most certainly–fortune’s wheel. You have, indeed, informed Main Street and paid tribute to the many hardworking Wall Street traders and support staff whose lives were upset by the events of September 2008.
Athens, GA
Larry, the moment I read the first page of your book I was already captivated. Not only do I want my children, nephews, and nieces to read this book to get a better understanding of how the world economy got here but also to learn how persevearance and honest-to-goodness hardwork can get you where you want to be because of your dreams and passion. Thank you for helping me better understand the workings of “Wall Street” and “Main Street”. Our system of capitalism is flawed and to date I have not seen any drastic changes in the system that will avert the next financial crisis. Like you father always said – “History always repeats itself”. And so the battle rages on between the Bulls and the Bears in Wall Street and World markets minus one icon of merchant banking, The Lehman Brothers. I learned a lot from the demise of Lehman Brothers because of you and Patrick Robinson.
I wish this book was required reading for every politician in Washington, as well as all the commentators who are lambasting the “government bailout” of Wall Street. I hate to think what would have happened if the Government hadn’t come to the rescue of the American economy.
During the 90′s when the regulatory environment was relaxed, the Wall Street financiers became consumed with greed and totally indifferent to their fiduciary responsibility to the people whose money they were using. It’s hard to be optimistic about America’s future when so many of our politicians still spout ideological rhetoric about “free markets” and rabble-rousing slogans about the evils of “big government.” This book gave me a much better understanding of how critical it is for the government to protect the public’s interest. The financiers certainly won’t.
Somebody should make this book into a series for television or a good movie. There’s an important message here for the American public.
Larry, I enjoyed your book, finding it entertaining and, for the most part, squaring with the facts.
However, I’d like to point out a few things:
1) Your suggestion at the outset that the financial crisis was partly caused by Clinton and Achtenberg trying to help 1st time home buyers share in the American dream, is at odds with most of what you say in the book. For example, you say Clinton and Achtenberg were responsible for 2 million new home owners between 1993 – 1999, but that time frame is obviously years before the burst. And, about 50% of mortgage failures are concentrated in 4 states; California, Nevada, Florida and Arizona, yet 1st time home buyers are more uniformly distributed.
2) You mentioned Clinton and Achtenberg several times in your prologue as being responsible for the financial crisis, but little or no mention of folks like Gramm, Greenspan, Cassano, Corbet, Sandler, O’Neal, Ranieri, Greenberg, etc., all of whom played a much bigger role and, many of whom, profited handsomely.
3) You place yourself amongst a group of the best and the brightest, working long hours and employing clever strategies to make huge profits. You make it sound as if the investment banker is key to economic prosperity, yet no investment bank has ever made a nickel. You are amongst a group that simply redistributes the wealth created by others. People like Edison, Ford, Carnegie, and more contemporary folks like Jobs, Gates, Hewlett, are the creators of wealth, taking raw materials and intellect and producing products and jobs. You and the people you admire spend your energy concentrating wealth in the hands of a few at the expense of millions. You devise clever schemes to take money out of pension accounts and 401Ks and put it in the bank accounts of people like Dick Fuld.
I sometimes think about what this world would look like if the brilliant people feverishly working to move the money around, redirected their efforts to actually do some good, perhaps in medicine, engineering or education.
Larry, I just finished your book. Very interesting and well worth the read, but I can’t decide whether Colossal… is meant to be an autobiographical, historical, or financial effort. While some personal background and perspective is great, you went overboard (‘overbored’). Given your work in the securities industry, it would have been more compelling had you given more background on trading rationale, etc. Nonetheless, good effort. Thanks.
Larry, I just ordered your book and cannot wait for it to come in. After watching your video and reading the comments from others who have read I am hoping it comes quicker than expected.
I look forward to reading your book and will keep you posted on my thoughts after wards,
John
Dear Mr. McDonald, I was at the Public Library and saw the book “A Colossal Failure Of Common Sense – The Inside Story of the Collapse of Lehman Brothers” and felt a kinship with the Bronze Bull photographed for the Cover. I had not seen the Bull before. It is gorgeous and is what made me want to read the Story. I suppose I was thinking the plot would have the Lehmans run with those Bulls I’ve seen on TV (is it the Streets of Pamplona?) and someone wouldn’t have the common sense to get out of the way. I didn’t see the word “Bull” in the Index but I read the Book anyway. It was a lot of fun and I laughed out loud much of the time. I’d like to talk with you sometime about whether the character Richard Fuld was a Bull? His part sounded alot like he ran the Firm as though it was supposed to have something to do with Bulls running the streets? Are Bulls Risk Takers? It seemed as tho’ the Story had strong achieving Bears. It would help to know what the Bull symbolizes. Could you please write a book about Bulls for Kids and explain what the Bull means in our world?