A Colossal Failure of Common Sense (a Review)

Former Lehman convertible bond trader Lawrence McDonald has penned the story of Lehman Brother's spiral into bankruptcy. This book is highly readable and does a great job of explaining some very difficult concepts (CDOs and the other derivatives that caused Lehman to fail for instance) in a way that non-industry experts can understand.

The story is also the tale of how our economy got into the mess it is in now, for Lehman Brothers was but one of the firms that made the mistake of not properly controlling their risks. It is the tale of how some senior managers in the firm wanted growth at all costs and were unwilling to listen to anyone who raised concerns that the firm was grossly over leveraged.

As one of the people who worked at Lehman when it fell, I can absolutely feel the authors pain at seeing a firm he truly liked working at sink into the abyss. Like Mr. McDonald, I look back at Lehman's collapse not with anger, but with profound sadness. The firm was a great place to work, was filled with some truly great people, and is missed by all of us who worked there.