''A Colossal Failure of Common Sense: The Inside Story of the Collapse of Lehman Brothers'' is a 2009

non-fiction Nonfiction, or non-fiction, is any document or media content that attempts, in good faith, to provide information (and sometimes opinions) grounded only in facts and real life, rather than in imagination. Nonfiction is often associated with b ...

book written by

Lawrence G. McDonald Lawrence 'Larry' G. McDonald is a ''New York Times'' bestselling author and CNBC contributor, currently founder o'The Bear Traps Report' an investment newsletter focused on Political and Systemic Risk with actionable trade ideas and Macro perspect ...

and Patrick Robinson which chronicles the events surrounding the

bankruptcy of Lehman Brothers The bankruptcy of Lehman Brothers on September 15, 2008, was the climax of the subprime mortgage crisis. After the financial services firm was notified of a pending credit downgrade due to its heavy position in subprime mortgages, the Federal R ...

in the context of the

financial crisis of 2007–2010 Finance is the study and discipline of money, currency and capital assets. It is related to, but not synonymous with economics, the study of production, distribution, and consumption of money, assets, goods and services (the discipline o ...

and the

subprime mortgage crisis The United States subprime mortgage crisis was a multinational financial crisis that occurred between 2007 and 2010 that contributed to the 2007–2008 global financial crisis. It was triggered by a large decline in US home prices after the coll ...

. The work is divided into a

prologue A prologue or prolog (from Greek πρόλογος ''prólogos'', from πρό ''pró'', "before" and λόγος ''lógos'', "word") is an opening to a story that establishes the context and gives background details, often some earlier story that ...

, an

epilogue An epilogue or epilog (from Ancient Greek, Greek ἐπίλογος ''epílogos'', "conclusion" from ἐπί ''epi'', "in addition" and λόγος ''logos'', "word") is a piece of writing at the end of a work of literature, usually used to bring c ...

, and twelve chapters. As of August 9, 2009, the book was 7th on ''The New York Times'' Best Seller list for hardcover nonfiction. ''A Colossal Failure of Common Sense'' is translated into 12 different languages.

Summary

The book is highly critical of

Richard Fuld Richard Severin Fuld Jr. (born April 26, 1946) is an American banker best known as the final chairman and chief executive officer of investment bank Lehman Brothers. Fuld held this position from the firm's 1994 spinoff from American Express unt ...

Henry Paulson Henry Merritt Paulson Jr. (born March 28, 1946) is an American banker and financier who served as the 74th United States Secretary of the Treasury from 2006 to 2009. Prior to his role in the Department of the Treasury, Paulson was the Chairman ...

, and the

Gramm–Leach–Bliley Act The Gramm–Leach–Bliley Act (GLBA), also known as the Financial Services Modernization Act of 1999, () is an act of the 106th United States Congress (1999–2001). It repealed part of the Glass–Steagall Act of 1933, removing barriers i ...

, a 1999 act of Congress signed by former

United States President The president of the United States (POTUS) is the head of state and head of government of the United States of America. The president directs the executive branch of the federal government and is the commander-in-chief of the United States ...

Bill Clinton William Jefferson Clinton (Birth name, né Blythe III; born August 19, 1946) is an American politician who served as the 42nd president of the United States from 1993 to 2001. He previously served as governor of Arkansas from 1979 to 1981 ...

that repealed portions of the Glass–Steagall Act of 1933. The book contains an account of how McDonald, after attending the

University of Massachusetts Dartmouth The University of Massachusetts Dartmouth (UMass Dartmouth or UMassD) is a public research university in Dartmouth, Massachusetts. It is the southernmost campus of the University of Massachusetts system. Formerly Southeastern Massachusetts U ...

, selling pork chops, and self-teaching himself the material required to pass the

General Securities Representative Exam In the United States, the Series 7 exam, also known as the General Securities Representative Exam (GSRE), is a test for entry-level registered representatives, to buy or sell security products such as corporate securities, municipal securities, ...

, went on to develop the website ConvertBond.com, which was later purchased by

Morgan Stanley Morgan Stanley is an American multinational investment management and financial services company headquartered at 1585 Broadway in Midtown Manhattan, New York City. With offices in more than 41 countries and more than 75,000 employees, the f ...

. The author's stated expertise, in the

convertible bond In finance, a convertible bond or convertible note or convertible debt (or a convertible debenture if it has a maturity of greater than 10 years) is a type of bond that the holder can convert into a specified number of shares of common stock ...

market, was what allowed him to create the website ConvertBond.com during the

dot-com bubble The dot-com bubble (dot-com boom, tech bubble, or the Internet bubble) was a stock market bubble in the late 1990s, a period of massive growth in the use and adoption of the Internet. Between 1995 and its peak in March 2000, the Nasdaq Comp ...

, and successfully sell it to Morgan Stanley before the Internet bubble burst. It was while he was working at Morgan Stanley that McDonald was offered a job as vice-president at

Lehman Brothers Lehman Brothers Holdings Inc. ( ) was an American global financial services firm founded in 1847. Before filing for bankruptcy in 2008, Lehman was the fourth-largest investment bank in the United States (behind Goldman Sachs, Morgan Stanley, a ...

. The book characterizes Richard Fuld as being out of touch, smug, and a ruthless CEO with a short temper and a penchant for rage. The book sarcastically refers to Fuld as "his majesty," "god-like," and a "spiritual leader." McDonald believes that the United States government should have saved Lehman Brothers, and that Dick Fuld falsely believed that the United States government would save the company after having a meeting with

in the spring of 2008, which led him to engage in unnecessarily risky behavior and reject an offer of $18 per share from the

Korea Development Bank Korea Development Bank (KDB Bank, SWIFT: KODBKRSE) is a wholly state-owned policy development bank in South Korea. It was founded in 1954 in accordance with The Korea Development Bank Act to finance and manage major industrial projects to expedite ...

as late as August 2008."Ex-Insider's Book Details Lehman Brothers Collapse" - NPR.org
Retrieved December 30, 2009

Chapters

# A Rocky Road to Wall Street # Scaring Morgan Stanley to Death # Only the Bears Smiled # The Man in the Ivory Tower # A Miracle on the Waterway # The Day Delta Air Lines Went Bust # The Tragedy of General Motors # The Mortgage Bonanza Blows Out # King Richard Thunders Forward # A $100 Million Crash for Subprime's Biggest Beast # Wall Street Stunned as Kirk Quits # Fuld, Defiant to the End

Notes

References

External links

Book page at Random House, Inc.

{{DEFAULTSORT:Colossal Failure of Common Sense, A Books about stock traders Lehman Brothers 2009 non-fiction books Business books Finance books

Summary

Chapters

See also

Notes

References

External links