72 pages • 2 hours read
Too Big To Fail
A modern alternative to SparkNotes and CliffsNotes, SuperSummary offers high-quality Study Guides with detailed chapter summaries and analysis of major themes, characters, and more.
Themes
Wall Street Versus Main Street
As the 2008 financial crisis unfolded, the media, in particular, characterized the activities of the big banks as helping Wall Street at the expense of Main Street, which “exasperated” (32) some of the key players, including Richard Fuld. Congressmen also picked up that theme in the hearings related to the crisis, asking why people on Wall Street should be bailed out while “people on Main Street struggle to pay their mortgages” (69). This type of reference could backfire at times: Paulson used it during the hearings on TARP and Barney Frank thought it was “disingenuous” (446) of him.
Without using that phrase, other key players demonstrated that this characterization might not be far from the truth. For example, Fleming of Merrill Lynch noted that Paulson’s constituency was the US taxpayer, whereas his was “Merrill Lynch shareholders” (324). Likewise, Steel of Goldman Sachs described it as his job “to protect my shareholders” (480).
Hazards of Ignoring Warning Signs
Throughout the book, Sorkin points out when warning signs were ignored for various reasons, such as hubris, management structure, or carelessness. He does not definitively argue that the crisis could have been prevented if these warnings had been heeded, but he makes every effort to point out when they were ignored. For example, Stan O’Neal of Merrill Lynch, the CEO before John Thain, had “never paid attention to risk management until it was too late” (148).
The Power of Communication and the Hazard of Miscommunication
Throughout the book, communication problems have dire consequences that contributed to the financial crisis by delaying or rendering impossible certain solutions to the crisis. For example, certain CEOs, such as Richard Fuld, are portrayed as approaching certain meetings with a lack of finesse. Given the amount of pressure they were under from shareholders, employees, and the public, that is not surprising, but this also prevented certain meetings from being productive.
Rumors and leaks are also emphasized as problematic or, at worst, as used as a tool to spread misinformation about a competitor. Fuld, for example, noted that it is important to “kill rumors” before they become “self-fulfilling prophecies” (15). At the same time, key players in the crisis, such as Paulson, would deliberately release leaks at times, hoping that the media would pick them up and run with them.
Certain cross-cultural communication problems also seem to come into play in the discussion of dealings with institutions in the UK, China, Korea, and Japan. In dealing with Barclays, apparently none of the key players thought about the interests and powers of the UK government to squash its potential deal to purchase Lehman’s assets. Likewise, when entering into negotiations with the China Investment Corporation, it was a major faux pas for Morgan Stanley to be dealing with a Japanese corporation at the same time without informing CIC. And in Fuld’s dealings with the Korean Development Bank, he was overly aggressive, “badgering” the head of the bank and then giving him a term sheet that contained a “red flag” (217). Ultimately, some of the international deals described in the book might well have had a better outcome if they had been handled with more finesse.
Unlock all 72 pages of this Study Guide
Plus, gain access to 9,150+ more expert-written Study Guides.
Including features: