The Blundering Herd

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How’s that for an awesome article title? Its from a Vanity Fair article excerpting Bethany McLean and Joe Nocera’s new book, All the Devils Are Here: The Hidden History of the Financial Crisis

The book is being touted as “The inside story of the collapse of Merrill Lynch — How a “Fantastic Lie” and a new strategy of aggressive risk killed the firm. Check out the intro:

“In the years leading up to the financial crisis of 2008, there was no more infectious disease on Wall Street than Goldman envy. Goldman Sachs, perhaps the most storied name in all of American finance, had gone public only in 1999, the last of the big firms to do so. After the I.P.O., Goldman’s mind-boggling profits were on full display. Starting in 2003, Goldman went on a run the likes of which had rarely been seen in American business. In just three years, its revenues more than doubled, to $38 billion, as its profits skyrocketed. In 2007, C.E.O. Lloyd Blankfein received a bonus of more than $68 million. Even junior traders made millions. Who wouldn’t be jealous of numbers like those? UBS, Citigroup, Credit Suisse, Lehman Brothers, Deutsche Bank—they were all stricken, to varying degrees, with Goldman envy.

No firm, though, had it worse than Merrill Lynch. And once the crisis struck, there was no firm for whom the disease would prove to be more fatal.

It was odd, in a way. To most Americans, pre-crisis, the Merrill Lynch name was far more storied than Goldman’s. Certainly, it was far better known. Merrill was the “Thundering Herd” that was “Bullish on America.” It had offices in every nook and cranny in America, where brokers stood at the ready to sell middle-class Americans the stocks and bonds they needed to put their kids through college and build their retirement nest eggs. To most people, what Goldman did was a complete mystery. What Merrill did was something everyone could see and understand.”

Delicious . . .

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Source:
The Blundering Herd
Bethany McLean and Joe Nocera
Vanity Fair, November 2010
http://www.vanityfair.com/business/features/2010/11/financial-crisis-excerpt-201011

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