Thursday, February 10, 2011

Recommended Reading: The Big Short

The fall of 'Lehman Brothers' in the later half of 2008 was a defining moment for me. Not as much for what Lehman stood for as for the resulting job losses in Lehman India (where some of my dear friends were proud employees once).

What I did not realize then, pretty obvious in hindsight, is the fall of Lehman Brothers had a more profound effect on wall street. This event marked the demise of high leverage Investment banking that was a hallmark of USA's capitalistic economy.

How did then this well oiled machine go so wrong? How come top notched financial innovations got punished by the very market they created?

Michael Lewis's 'The Big Short' takes throws light on what caused this catastrophe (biggest recession since 1930s'). A must read for all to understand how the fundamental weaknesses of the system (allowing esoteric high-leveraged deals), action (or rather inaction) of credit rating agencies such as Moody's S&P and above all the greed of Capitalist world joined hands to derail world's biggest economy.

Michael Lewis's deft treatment of such a prosaic topic is commendable. The sensitive handling of key protagonist coupled with thoughtful explanation of exotic financial instruments, makes the book, a compelling read.

Highly recommended.

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