On The Brink by Henry Paulson  is the first book I’ve read cover to cover in the last year. You’re probably not surprised to hear that I don’t read every single page of the books I review on Bargaineering but for On The Brink, I read every last page. On The Brink is Henry Paulson’s, then Treasury Secretary, account of the financial crisis that nearly brought the United States, and must of the world, to its knees. Throughout the crisis, I was reading all the news stories about various rescues, bankruptcies, etc. but I always knew there was more to the story. I knew that there were things going on behind the scenes that we wouldn’t hear about for quite some time and I didn’t expect to read about it in a book so soon.
If you want to learn what happened, what caused it, and what some of the most brilliant and hardworking financial minds in the world did to prevent a complete meltdown, then you need to read this book. It reads like a novel, Paulson is frank (which is awesome), and you walk away feeling like you actually understand what happened and why certain things were done. And for $14, it’s a bargain.
There are three things the book shared that really stood out:
- How absolutely horrible things actually were – I had no idea the extent and I read a lot,
- How things were nearly derailed by political posturing (it was like arguing over who gets which deck chair on the Titanic, after it has hit the iceberg) – all the populist rhetoric about being anti-bailout was counterproductive,
- How Russia tried to convince China to sell GSE holdings (Freddie Mac, Fannie Mae) to force the United States to use emergency powers to save them! (it was only a paragraph on page 160, but I thought it was alarming)
I think part of it was well crafted storytelling (to get across the seemingly frenetic pace) but the economic crisis was just one (or three) thing after another. First you had Fannie Mae and Freddie Mac, then there was Bear Stearns, then the failed attempt to sell off Lehman Brothers, then commercial paper freezing and money market funds breaking the bucks, Treasury yields going negative, then a liquidity rescue of AIG and a hurried sale of Merrill Lynch to Bank of America, and that only takes you to page 245 of a 434 page book! (not including afterword)
Remember when pundits complained about Paulson being an ex-Goldman Sachs CEO and how government and Wall Street were in bed together? If that wasn’t the case, I’m almost certain that our financial system would’ve collapse if we had non-financial types trying to rescue it. The relationships Paulson had with people on Wall Street and counterparts in other nations seem instrumental in engineering rescue after rescue after rescue.
Finally, one insight that the book never mentioned but seemed evident in Paulson’s account of what happened – the CEOs of these financial companies didn’t really care about money, they cared more about their legacy. Dick Fuld will forever be known as the guy holding the reins when the stagecoach called Lehman Brothers flew off the mountain. He was the FINAL Chairman and CEO of Lehman and he will forever be remembered for that. All those CEOs had enough money before they showed up for the job, it was about their legacy.
Honestly, I could write a lot more about what I thought of the book but it really wouldn’t do it justice. I think that if you want to understand what happened in the last two years, you must read this book. If you have ever made any statements about the crisis, reading this book will surprise you and probably make you eat some of yours words (or at least reconsider them).