Out of date before it's published
I wouldn't want to be a financial writer with a book coming out later this year -- every pre-plunge-written text about the U.S. economy and its health is going to sound hopelessly dated (unless the author attaches an afterword which, in the end, may only underscore the book's weakness).
Arriving in our offices this week was one such unlucky candidate: "Panic! The Story of Modern Financial Insanity" edited by Michael Lewis (W.W. Norton). Lewis has collected briefs and articles by a variety of economic critics that range over economic crises of the last 20 years. The book is scheduled to be published in December.
Yes, as you might expect, the book suffers from the fact that something is definitely missing. On the other hand, the long view of Lewis' selections provides some helpful context about how we got here (the subprime mess, the tulip-bulb speculation frenzy of the past several years, a lack of regulatory oversight). And it also presents some interesting, sometimes unflattering portraits of the various people involved.
More on these personalities after the jump.
An unflattering portrait of former Bear Stearns CEO James Cayne (above, left) comes from Kate Kelly's 2007 Wall street Journal article "Bear CEO's Handling of Crisis Raises Issues":
As Bear's fund meltdown was helping spark this year's mortgage-market and credit convulsions, Mr. Cayne at times missed key events. At a tense August conference call with investors, he left after a few opening words and listeners didn't know when he returned. In summer weeks, he typically left the office on Thursday afternoon and spent Friday at his New Jersey golf club, out of touch for stretches, according to associates and golf records. In the critical month of July, he spent 10 of the 21 workdays out of the office, either at the bridge event or golfing, according to golf, bridge and hotel records.
The same is true of Michael Lewis' portrait of Jim Cramer (above, center), whom Lewis skewers in a March 2008 piece for Bloomberg News, "What Wall Street's CEOs Don't Know Can Kill You." Here's what Lewis wrote about Cramer's response to the crisis at Bear Stearns earlier this year:
Three days earlier, on theStreet.com, Jim Cramer listed Bear Stearns common stock as a "buy" at $62. On his CNBC program that day, he showed his viewers a chart of Bear Stearns' stock price and hollered, "Bear Stearns is fine! Do not take your money out of Bear"....
Then, when the company tanked, Lewis writes:
...Cramer went back on CNBC to explain that he never intended for anyone to go and actually BUY shares in Bear Stearns -- only that, if they happen to bank with Bear Stearns, they shouldn't worry about losing their money....
The most prescient one of all in "Panic!" seems to be economics professor Paul Krugman (above, right), who warned the public in a 2007 New York Times article, "After the Money's Gone":
How will it all end? Markets won't start functioning normally until investors are reasonably sure that they know where the bodies -- I mean, the bad debts -- are buried. And that probably won't happen until house prices have finished falling and financial institutions have come clean about all their losses. All of this will probably take years.
Meanwhile, anyone who expects the Fed or anyone else to come up with a plan that makes this financial crisis just go away will be sorely disappointed.
Reading this book is like rereading a murder mystery -- you know what happened, you know whodunit, and every page has a fatalistic sound that the authors probably never intended.