FOOL’S GOLD by Gillian Tett

FOOL’S GOLD: How the Bold Dream of a Small Tribe at J. P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe

By Gillian Tett (293 pages. Free Press. $26)

The New York Times reviewed this book in an article entitled, "Greed Layered on Greed, Frosted With Recklessness" by Michiko Kakutani (read the entire review here).

In her useful new book, Gillian Tett of The Financial Times writes that the global financial meltdown, which economists estimate could result in total losses from $2 trillion to $4 trillion, was “self-inflicted.” Unlike many banking crises, she adds, “this one was not triggered by a war, a widespread recession, or any external economic shock.” Rather, the “entire financial system went wrong as a result of flawed incentives within banks and investment funds, as well as the rating agencies; warped regulatory structures; and a lack of oversight.”

To put it another way, the crisis was, in the words of the Newsweek business columnist Daniel Gross, “a man-made product that turned out to be immensely toxic and damaging” — not, as so many in the “Smart Money crowd” insisted, “a random, once-in-a-lifetime thing that fell out of the sky.”

It was also a disaster, he notes, with “plenty of blame to go around,” including “poor regulation, eight years of a failed Republican economic philosophy, Wall Street-friendly Democrats who helped stymie reform, misguided bipartisan efforts to promote home ownership, Wall Street greed, corrupt C.E.O.’s, a botched rescue effort” and poor judgment calls on the part of the Fed, and top bankers who in many cases did not even understand the derivatives their firms were trading in.

In short the current global financial crisis is a story about people who thought they were the smartest guys in the room and who turned out to be remarkably naïve, reckless or, in some cases, downright stupid. It’s a story — novelistic in its narrative and moral arc — about hubris and greed and heedlessness, about people, as Fitzgerald wrote in “The Great Gatsby,” who “smashed up things and creatures and then retreated back into their money or their vast carelessness” and “let other people clean up the mess they had made.”