Among the numerous books now available about the great financial implosion of 2007-8 that touched off the current Great Recession (I'm damned if some research board can tell me it's over when almost 10 percent of us aren't working), this one is a curiosity. Gessen found himself an intelligent, articulate specimen of the financial manipulating class who was willing to converse at intervals during the panic. He reproduces the guy's musings and evolution here.
This is not the book from which to start if you haven't already figured out the general contours of the mysterious financial products that traders invented during the financial boom decade and used to line their pockets while fleecing institutions and individuals who trusted them. For that -- explanations of derivatives, CDOs, credit default swaps, SPVs, etc. -- I still recommend one of first books about the collapse, Gillian Tett's Fool's Gold. She may be a little over-kind to her informants at J.P. Morgan, but she explains intricate instruments very lucidly.
The Diary on the other hand provides one man's answer to the vexing question, what did they think they were doing when they turned the financial system away from providing capital to the real economy and into a Winchester mystery house cum casino. (Besides getting personally rich, of course.) The interviewee, referred to here as "HFM", comes across as an honest guy with a ringside seat who apparently largely traded more traditional products and who was suspicious of subprime mortgage finance from early on. As the crisis broke, he was inclined to attribute what happened to the myopia of "experts" in the nether regions of mortgage trading who couldn't see the forest (too much uneconomical building pushed out via phony financing to too many less than creditworthy borrowers) for the trees (charts and graphs used to sell the bad loans.)
I think there's wisdom in that for people in any field -- sometimes the well-informed outsider can see more accurately than the hyper-experienced, embedded insider.
The interviewer asked this guy what else he might be doing with his acquired wisdom about finance that might satisfy him -- and by implication be more socially useful. That question elicited this:
I don't know if he's just peddling 20/20 hindsight there, but the idea that lawyers can get wrapped up in a legal paradigm and fail to see a bigger picture fits with his observation of his own firm's experience with subprime mortgage paper.
As the crisis deepened in the fall of 2008 and showed its scope in 2009, HFM began to lose some of his confidence in the finance world. He says he subjected his co-workers to periodic "fits" in which he would protest
By the middle of 2009, he's wondering whether some of the people in his business are simply crooks.
By the end of the book, he's ready to, at the least, take a break, move away from New York, see whether he can live without being known as a "hedge fund partner guy."
HFM's realization that there is more to life than making money from pushing money around isn't much use to the many victims of financial fraud and folly. But he's an interesting guy. This social disaster was not a product of the weather; it had real people at its center -- via HFM's reflections, we get a little more sense of who they were and their many limitations. Keith Gessen did some fabulous interviewing and editing on this project.