House of Cards

By William D. Cohan Copyright 2009

This book can be divided into three sections. The first section focuses on the events leading up to the collapse of the Wall Street investment firm Bear Stearns. It explores the last days of the firm's existence in a minute-by-minute narrative of events and conversations. The narrative consists primarily of transcripted interviews with some of the key figures at Bear Stearns and other people familiar with the firm's collapse.

The second section of the book consists of stories about the 80 year history of Bear Stearns from its founding to the period shortly before its demise. There are also profiles of the people who built and ran the company.

The final section of the book is a review of the housing bubble and the residential mortgage business that fueled the bubble. The author places significant blame for the housing bubble on the government. The government put in place policies to enable low-income people to buy houses. The government also set artificially low interest rates.

Low interest rates caused fixed-income investors, who traditionally seek low-risk investments, to seek higher interest rates in non-traditional investments that appeared to be low-risk. Investors found these apparently low-risk investments at Wall Street firms who had engineered new complex real estate investments based on residential mortgages and sub-prime mortgages. These new real estate investments were supposedly low-risk because traditional mortgage investments had historically been low-risk. The result was money flowed into the real estate market and created a huge financial and real estate price bubble that collapsed in 2008 and brought down Bear Stearns and other investment firms.

This book is rather tedious and repetitious. But it is comprehensive and covers all angles of the collapse of Bear Stearns. So if a reader is looking for a definitive history of the collapse of this company and what caused it, they will find this book enjoyable. However, most readers, even ones interested in the real estate bubble and collapse, will find this book contains more information than they require.

Also, as mentioned earlier, most of the book consists of transcript-like text from interviews with Wall Street bankers. And most of these people seem rather unpleasant and obnoxious. Many of them also seem quite stupid. They all just wanted to make a lot of money and travel around the world and attend social events and parties. They didn't have any interest in doing anything productive by creating something of use to other people. They are very unappealing people, so spending time reading what they have to say is not very enjoyable.

So for most people, this book will be a waste of time to read.

The Rise and Fall of Bear Stearns

By Alan C. Greenberg Copyright 2010

Bear Stearns was an investment bank and stock trading firm that collapsed during the financial crisis of 2008. The firm collapsed when investors and banks wouldn't loan them money and withdrew their funds. The banks and investors were concerned that Bear Stearns' investments in residential mortgages would bankrupt the company. In an attempt to salvage some value for shareholders and save employee's jobs, Bear Stearns agreed to sell itself to JP Morgan for a fraction of the price it's stock had been trading just weeks prior to its collapse.

The author of this book, Alan Greenberg, is the former head of Bear Stearns. He worked at the firm his entire career, starting in 1949. He rose through the ranks to eventually lead the company. He stepped down from the top job in the 1990's but continued to work at the company and serve on the board of directors. He is now in his eighties. In this book he provides some biographical information about his life and also the rise and fall of Bear Stearns.

Alan Greenberg is a charming man with a sense of humor. And in this book he uses his charm and humor to sugarcoat attacks on some of his former colleagues at Bear Stearn. He seems to have been offended by some of their comments about him, which they made to the author of another book about Bear Stears. Apparently, his former colleagues considered him to be out of touch and petty minded during his later years at the company.

After reading this book, most readers will probably agree that Alan Greenberg stayed at Bear Stearns long past his usefulness. Reading between the lines, most readers will probably decide the company was run by a bunch of cronies who didn't like each other very much. These cronies, including Alan Greenberg, were out of touch and didn't really understand economics or free market investing. They were just "along for the ride" in a place and time that provided them the opportunity to acquire huge amounts of money while doing nothing productive. The policies of the Federal Reserve and the federal government created Wall Street firms like Bear Stearns. These firms do nothing but create huge amounts of paper wealth they use to skim real wealth from the real economy.

The most revealing part of the book, and the part which best demonstrates how Alan Greenberg was out of touch, is his discussion of the housing bubble and mortgage market. It is clear he had no understanding of the disparity between middle class incomes and house prices in the mid-2000's and how the mortgage market was out of control. He repeatedly tells how surprised he and everyone else was when residential mortgage investments began losing money when home owners stopped paying their mortgages.

The most ironic part of the book is when the author discusses how when he ran the company he always sought to hire smart, poor people who had a desire to become rich. Yet in his later years at the firm, all the key employees, including him, were extremely rich and seemed very content with their financial status. That should have been a clue to him that it was time for him to retire along with the rest of his cronies.

In spite of the negative comments above, this is actually an enjoyable book to read. The author is likable and has many good stories to tell. And even though he makes very insulting comments about some of his former friends, he actually seems fair minded and likable. The people he insults are all rich tough guys who can easily defend themselves anyway.