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Following on from attending this author's event at the Oxford Literary Festival back in the spring, and in the current climate of the first year anniversary of the demise of Lehman Brothers covered with news items, documentaries and docudramas on our UK TV channels, I finally read How I Caused the Credit Crunch. Why did I want to read this? To gain a better understanding of what happened and what went wrong. Why this book? I said in my earlier post that it was either a brave or a foolish man who would write a fictionalised account of his own experiences as banker during the period concerned and I wanted to read that first hand account. Having listened to and briefly spoken to the author at Oxford, I fell off the fence on the side of 'brave' at the time. Having read the book, I remain there.
Just think about your own twenties. Fresh out of university, recruited into an organisation for your first job, you want to both fit in and succeed. You may question certain activities, but you are still young enough and inexperienced enough to be naive at the core, and motivation to fit in matters more. You are well rewarded for your devotion to the workplace and promised more if you perform. But even before that, an olive branch is not simply extended but thrust in your face with an induction training course that shows you just how opulent your life as a banker could become. Those innocent pieces of meat go into the grinder and come out as uniform and conforming, highly-motivated minced bankers. Simple.
It's hard to read this book, albeit fiction, and not feel that all that happened within happened to the author himself. He may have chosen to fictionalise to avoid the blame culture, but writing with the protagonist Andrew Dover in the first person leads you think 'author's voice' and thus author's own experiences in all cases. I had to remind myself that this was indeed a fictionalised account, based not only on the author's experiences but also things he will have heard about or observed.
The main positives in How I Caused the Credit Crunch come from the author's ability to let us see into the culture operating with the CDO selling areas of the banks. (Not that I believe for one minute that that sort of culture stops there. I have worked in the City on more than one occasion and when a previous boss was on holiday and someone else opened his mail, a flyer from lap dancing club Spearmint Rhino popped out. And we are talking the equivalent of back office - read "admin staff" – here.) We learn of the culture of the way the bankers do business, how they entertain their clients and how their rewards are basically based on poaching value from another firm. Homes with butlers are usual and not unusual, and a dinner at a Gordon Ramsay restaurant can lead to excessive regurgitation in the toilets because of the excess entrenched and expected. The feeling that bankers have lost all sense with reality is perfectly displayed here from an author who provides intelligent and human reflection.
And, in the true sense of a thriller, How I Caused the Credit Crunch will scoop you up with the knowledge that a very dark ending is about to happen, that those dark clouds gathering are about to pour and when they do… The book is a page turner.
In understanding the markets and products, I'd draw lines and split the book in thirds. It starts with excellently drawn and simple explanations of the products. They become more complicated in the second third, but it's still possible to follow. For the last third, a layman would remain mystified, but the sense of impending doom turns those pages.
Ultimately, at the end of the day, the issue is this: if you lend money to enable people to buy a home and their income does not support the repayment schedule, a bank/investor will make a loss. It's been done before but without the spreading of risk such as with CDOs that made it harder to follow the risk and determine where the key risks were likely to materialise. In this climate, as the book shows, this led to an almost total breakdown of the world's financial system in the west's capitalist world and the ensuing recession. But let us not forget that an individual's taste for credit was also matched by governments' taste for credit in respect of the US and UK, in relation to the recession.
As I said before, brave man with intelligent reflection as opposed to fool. Let How I Caused the Credit Crunch be your start in understanding why we are where we are today and consider the changes necessary to improve our future. There is a system in operation that does not support our overall economic wellbeing and you can start to understand it in How I Caused the Credit Crunch.