Review: Fool's Gold by Gillian Tett | Books | The GuardianTo understand the calamity on Wall Street, we need erudite financial analysis and good old-fashioned stories about human fallibility. Gillian Tett, who oversees global market coverage for The Financial Times, offers some of each. Morgan built a monster that got out of control and helped destroy much of their industry. She shows us the financial world through the eyes of her talented but short-sighted subjects: geniuses at math and marketing, they thought they had discovered how to defy the laws of nature. The Morgan team thought they could combine esoteric financial instruments so cleverly that repayment risk would simply disappear, or at least become so diluted as no longer to matter. Relieved of risk, banks would lend more money, corporations would grow more quickly and capitalism would blossom.
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At some point during Gillian Tett's absorbing year gallop across the Wild West of the world's financial markets, the reader will find themselves snapping away from the page and saying, "Hang on a minute. This is nuts. Would that we had had this narrative in real time. We are familiar enough with the chain reaction of explosions that began two years ago, deep in the credit markets, closing in on the real economy until they blew up our pensions, house prices and job prospects. But the question of when the time- bombs were set — and by whom, and how —remains a subject of bewilderment to victims all around the globe. In bewilderment and loss, there is the natural inclination to lash out, to rip apart the institutions of capitalism and give in to the temptations of the mob.
S urprisingly for an account of the masculine world of finance, this book is full of women. Apart from Gillian Tett herself, who has been the most prescient British financial journalist on the credit crunch, the most fascinating is Blythe Masters, a blonde, porcelain-faced Tilda Swinton lookalike who has the dubious distinction of having devised the first credit default swap. She also took a tiny device into the maternity ward to pass the time tracking share prices - doesn't everyone? But it is Terri Duhon, another female financier, who best sums up Tett's core thesis: that it is not complex derivatives that were to blame for the crisis but the recklessness and greed of the bankers who so eagerly adopted them and used them in ways which their inventors claim never to have envisaged. Duhon, a Harley-Davidson-riding maths whizz from rural Louisiana whose talent for numbers catapulted her into the rarefied world of finance, commented: "When car crashes happen, people don't blame cars or stop driving them, they blame the drivers! Derivatives are the same - it's not the tools at fault but the people who used those tools.
Drawing on exclusive access to J. The story begins with the intense Morgan brainstorming session in beside a pool in Boca Raton, where the team cooked up a dazzling new idea for the exotic financial product known as credit derivatives. That idea would rip around the banking world, catapult Morgan to the top of the turbocharged derivatives trade, and fuel an extraordinary banking boom that seemed to have unleashed banks from ages-old constraints of risk. Morgan itself stayed well away from the risky concoctions others were peddling—catastrophe followed. In she was awarded the Wincott prize, the premier British award for financial journalism, and in was named British Business Journalist of the Year.
Much the same is true of financial innovations: financial products don't destroy financial systems, people destroy financial systems. This, at least, is the premise of Gillian Tett's latest book. An editor at the Financial Times, she is also a trained anthropologist who has spent as much time mulling over wedding rituals in Tajikistan as delving into the weird behavioural patterns of bankers: her way of looking at the ongoing credit crisis has been to study the personalities of the small tribe at J. Morgan who unwittingly unleashed the catastrophe. She starts at a hotel in Florida, describing the high jinks of a team of young J. Morgan traders at an 'offsite' meeting in