The End of Wall Street by Roger Lowenstein

Roger Lowenstein, the author of a fine biography of Warren Buffett, the chronicler of the failure of Long-Term Capital Management and now, with "The End of Wall Street," of the financial crisis, is the fair man of financial journalism. He writes with evenhanded clarity, neither hyperventilating nor condescending. He has opinions, but they are clearly subordinated to diligent reporting and research; and he does not trot out overtly political views short of a sense of fair play and good sense. He writes graceful, straightforward prose that arranges itself into robust paragraphs. He rarely raises his voice, and when he does it's usually over a noteworthy transgression of some sort, the payment of absurd bonuses or moments of remarkable blindness. The financial world, Lowenstein always seems to be suggesting, is a dauntingly complex place, but allow me to guide you, engaged if inexpert reader, through its difficulties.

In "The End of Wall Street," all those virtues are on display. Lowenstein seems to have diligently interviewed many of the actors in the crisis of 2008. He has carefully sketched what he views as the major antecedents to that disaster. He has tried to put it all into the proper context and to do so in a narrative that neither hypes the drama into a made-for-TV movie nor dulls it down into an academic monograph.

Yet, for all his considerable skill, this book feels flat. Some of this is beyond his control. "The End of Wall Street" part of an extraordinary outpouring of articles, books and now official reports that not only is not abating, but may well be increasing. We have already seen a number of ambitious attempts to give us a blow-by-blow of events from the fall of Bear Stearns Cos. through the nationalizations of Fannie Mae and Freddie Mac to the collapse of Lehman Brothers, the rescue of AIG and the threat to Morgan Stanley and Goldman, Sachs & Co. Lowenstein is treading fields already harvested by David Wessel ("In Fed We Trust"), Andrew Ross Sorkin ("Too Big to Fail") and Henry Paulson ("On the Brink"), among others. A flood of books examining policy and regulation has also begun, including Richard Posner's "The Crisis of Capitalist Democracy" to Simon Johnson and James Kwak's "13 Bankers: The Wall Street Takeover and the Next Financial Meltdown," discussed below.

What's a crisis author to do? The choices are obvious, if difficult to execute, now that being first is not an option. He can try to unearth new information, attempt to interpret available information in new and insightful ways or present it in ways that at least entertain us. Lowenstein has sifted through a mass of material, but new nuggets are rare. He does produce Bob Rodriguez, a money manager whom he nominates as a candidate for the swelling ranks of those-who-saw-it-coming (Michael Lewis offers more candidates in "The Big Short," see below). Rodriguez becomes a counterpoint to all the high officials and executives who insist the disaster could not have been foreseen. He provides a kind of frame of sanity -- a chorus of Cassandra-like prescience -- around Lowenstein's narrative, but that frame feels slightly forced. Rodriguez opens the book agitated by a dream that Fannie Mae and Freddie Mac had collapsed and he was being hauled into court for buying their securities. Once awake, he sells off Fannie and Freddie, leaving behind the merest hint that perhaps dreaming might be a form of financial analysis. Rodriguez then appears intermittently, usually warning of another sector about to implode. By the end of the book, he has left money management altogether and is racing LeMans cars, and one again wonders how to think about that. Did the lunacy get to him? Had he lost confidence in his own ability to read the markets? Or did he simply like racing? A circumspect Lowenstein doesn't help much.

Lowenstein's title creates a similar uncertainty by suggesting a definitiveness that's never justified or defended. During the depths of the crisis in late 2008, the meme that Wall Street was dying was a common one. After all, Bear disappeared into J.P. Morgan Chase & Co., Lehman Brothers crashed and burned, and Morgan Stanley and Goldman Sachs became Federal Reserve-regulated bank holding companies. Emotionally, there were powerful reasons to embrace "the end of Wall Street." Enormous global firms were evaporating; anything seemed possible. But even in that panicky, apocalyptic moment, only the gloomiest of souls believed that all of Wall Street would succumb (Lowenstein also never defines what he means by "Wall Street," which can be an extremely flexible term), and by the second quarter of 2009 it began to appear as if much of the joint would survive. Even if you argued that by "the end of Wall Street" you meant an era of swashbuckling, highly leveraged, innovation-addled, overnight-funded firms that prevailed, say, from the '70s on, then arguably we remain, for better or worse, in that era. "The end of Wall Street" is about as useful as the "everything's changed" mantra after Sept. 11. True perhaps, but false as well. And drawing the line between the two is difficult.

The meat of "The End of Wall Street" is a patient examination of the sources of the crisis and of the events that ensued. Anyone who has closely followed the crisis will have read much of this. (Lowenstein did much of his own reporting and footnotes diligently, but you still go through the text thinking, "Well, Sorkin had that, or Wessel reported that.") Lowenstein particularly emphasizes the development and rapid expansion of securitization and the explosion of collateralized debt obligations; he is very good at clearly laying out these complex instruments. He rolls through the growth of government-sponsored entities and the erosion of standards that accompanied it; he points fingers at figures across the political spectrum, jabbing Democrats (Barney Frank, Charles Schumer) and Republicans (Phil Gramm) alike. He recounts the rise of mortgage lenders such as Countrywide, Glendale Savings and Washington Mutual and how their machinery for pumping up mortgage volumes eventually bolted itself onto Wall Street's securitization machine. He touches on the growth of AIG's credit-default unit in London, the explosion of compensation, the battle between Brooksley Born and the deregulatory-fixated Alan Greenspan, Robert Rubin and Larry Summers over derivatives regulation.

What does he miss? Well, he is really focused on the growth of the real estate bubble. He does not deeply examine trade imbalances, particularly between China and the U.S., or the rise of money-driven political warfare that, paradoxically, opened up space for financial deregulation. He does not explore Federal Reserve interest rate policy, its complex relation with partisan politics and its ideological underpinnings. He does not delve into the roots of deregulation, the once-unassailable arguments going back to the '70s for American competitiveness, for free trade and for large, diversified, integrated financial firms that could compete around the world (not to say the complex dance that led to the hollowing out and eventual demise of Glass-Steagall). We now know that those experiments ended badly; what we still haven't begun to understand is what to keep and what to get rid of.

Lowenstein tries hard to be balanced and fair, but he's writing a book in which both he and his audience believe they know the ending: the demise of Wall Street, the end of an era, the loss of innocence, the clarity of knowledge. I don't mean to be overly harsh; as a layman's guide to the crisis, this is as good a book as any, but these issues are large and complex, and events, both in the real world and in the metaworld of commentary, reportage and historical analysis, are moving faster than ever. The belief in much of journalism that an earnest evaluation of what happened can provide clarity as to what to do next simply isn't the case -- at least not yet. The fact is, the roots of the crisis, the actions of regulators and policymakers, are not only technical, but are anchored in deep ambiguities and contingencies. Judging (and it involves judging, not simply investigating and revealing) is difficult and demands tradeoffs. It isn't just that the future always appears uncertain (a sentiment heard often after the mess), but that good and bad, right or wrong, true or false are often fatally mixed in varying degrees, whether it's early deregulation, the role of derivatives or the various bailouts. The underlying reality here is far stranger than the situation a rational and fair-minded Lowenstein depicts. He would have needed far more time and far more pages to begin to capture it. And then the question is, from a publishing perspective, would anyone read it?