Infectious Greed: How Deceit and Risk Corrupted the Financial Markets |  | Author: Frank Partnoy
Publisher: Holt Paperbacks
List Price: $19.00
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Seller: PERMGAIVA
Rating:  28 reviews
Sales Rank: 493280
Media: Paperback
Pages: 496
Number Of Items: 1
Shipping Weight (lbs): 0.8
Dimensions (in): 8.1 x 5.5 x 1
ISBN: 0805075100
Dewey Decimal Number: 364.168
EAN: 9780805075106
ASIN: 0805075100
Publication Date: January 1, 2004
Availability: Usually ships in 1-2 business days
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Product Description
“Readers are unlikely to find a more readable explanation of how the financial system has changed since the 1980s and who came unstuck.” —Financial Times
The still-unfolding financial story is terrifying. One by one, major corporations such as Enron, Global Crossing, and WorldCom are imploding all around us, prey to a greed-driven culture and dubious or illegal corporate finance and accounting. We have reached a perilous crossroads.
In a compelling and disturbing narrative, Frank Partnoy brings to bear all of his skills and experience as a securities attorney, financial analyst, and law professor to tell the story of the rise of the trading instruments and corporate financial structures that now imperil the economic health of the country. Starting in the mid-1980s, he documents how each new level of financial risk and complexity obscured the sickness of corporate America. Finally, Partnoy offers clear policies that can save our financial system.
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Showing reviews 1-5 of 28
 The only sure bets were the fat fees November 16, 2009
Luc REYNAERT (Beernem, Belgium)
From the 1980s onward, a financial `revolution' (better: disaster) took place. Top executives were paid with stock options. `Irrational Exuberance' reigned about the profitability of Internet companies. Financial instruments became so complex (better: risky) that control by regulators over the industry, control by owners over their company's books and control by executives over their employees was inexistent. Even the valuations of the financial products and/or of the trades themselves became impossible.
The players
The cop of Wall Street, the SEC, was controlled by the other players.
The politicians (the regulators, better: the deregulators) received ample campaign donations and promoted further deregulation.
The CEOs were responsible for massive accounting frauds. Two-thirds of them wanted a misrepresentation of their company's financial statements in order to pump up the share price.
The credit-rating agencies (an oligopoly) were paid by those who asked for a rating (of course, the highest).
The securities analysts pumped up the new offerings as true salesmen, and dumped the stocks after the fat fees were collected.
And those who put the money on the table, the `investors'? Well, they were considered to be morons and had to be fleeced.
Some financial instruments
Quantos (structured notes based on foreign interest rates, paid in home currencies)
Inversed floaters (coupon of x % - LIBOR), long term financed with short term paper
FELINE (Flexible Equity-Linked Exchangeable Securities) convertible preferred stock
CBOs (Collateralized Bond Obligations): bonds emitted offshore (and off balance sheet)
Synthetic CDOs (Collateralized Debt Obligations) based on credit default swaps (as `assets')
Trades
Trading systems based on standard deviations were demolished by the 1987 market crash (20 times s).
Trades on stable/low interest rates resulted in a $1.5 trillion loss in 1994 when the Fed hiked his rate by 0.25 per cent.
Carry trades on interest differences between currencies generated monstrous losses when the Mexican peso and the Thai baht fell into the ravine.
Some traders made a fortune (putting the entire capital base of the company at risk) on tiny price discrepancies (kinks) in the yield curve and by waiting for prices to converge. However, when other players stepped in, the sources of fortune dried up. Other discrepancies had to be found.
Result
The dot.com bubble burst.
Big companies (Enron, WorldCom, Global Crossing, Barings, Kidder Peabody) went bankrupt. `Sophisticated' speculators (LTCM) put the whole financial system at risk.
And ultimately, the CDO explosion brought the whole capitalist system on the brink of implosion. Governments had to step in to save the `free market'. But that happened after the publication of this book.
Frank Partnoy did a monumental job by delving up trading and `cooked books' secrets, by explaining outlandish investment `opportunities' and, ultimately, by exposing the extreme greed of the salesmen.
His phenomenal research will be a handbook for all those who want to understand the financial history of the world from the 1980s till the beginning of the Third Millennium.
A must read.
All We Need Is Honest Politicians- Where Are They? October 25, 2009
jake chase
1 out of 1 found this review helpful
For those who hope to understand what has gone wrong in a dysfunctional American economy, this book is like the joke about ten thousand lawyers at the bottom of a chasm- a good start. Frank Partnoy understands OTC derivatives and the arcane world of securities regulation and enforcement, and he makes it intelligible to any literate reader. The book was written in 2002, and if an honest Congress had bothered to read it chances are very good that our recent 'financial crisis' could have been avoided.
For those too cheap to buy the book and those Congressmen lacking sufficient attention span to absorb it, I will tell you that OTC derivatives trading has made financial regulation itself into nothing more than a joke. It is now impossible to evaluate the financial reports of any bank, corporation, mutual fund or money fund the securities of which are traded daily at the speed of light. Any allegedly regulated entity may be positioned to explode upon the next blip in the Mexican Peso, Thai Bhat or Burmese Fhart, and of course we now know what happens when ten trillion dollars of US residential mortgages are securitized and sliced and diced into tranches and insured by AIG: The taxpayers get a two or three or five trillion dollar bill and all the losses end up as profits in seven offshore hedge funds.
The obvious solution to this nightmare finance is to tax it and expose it to daylight, to force entities supported by US investors to account for their derivative exposure on a current basis. A simple two page federal stature would probably do the trick. [...]. Meanwhile, I will keep my money in my mattress and continue reading Frank Portnoy's books. If I were you I would do the same thing.
Nothing Complicated About It October 17, 2009
Linksman (Pinehurst, NC)
1 out of 1 found this review helpful
Written a full five years before the 2008 Financial Meltdown, this book explains to anyone with a basic understanding of the English language how and why our financial institutions and elected and appointed officials have allowed our Nation's prosperity to become hostage to the next blip in interest rates, currency exchange rates, commodity prices, etc.
Industry apologists claim that financial derivatives trading provides important societal benefits and is far too complex to be understood by mere mortals. Nonsense. Anybody familiar with Three Card Monte understands all he needs to know. Our markets were allowed to become an overleveraged floating crap game because those on the inside make hundreds of millions of dollars as a result.
There is overwhelming evidence that those charged with regulating our financial system are simply in the bag, including our three most recent Presidents, very nearly all Senators and Congressmen of the past twenty years, prominent officials of the SEC, CFTC, Treasury Dept, Federal Reserve, and Agencies. There appear to be no significant exceptions. Enabling financial plunder seems to be one issue about which Republicans and Democrats universally agree. Much trumpeted reform proposals are simply lipstick on the pig. The corruption is so deeply ingrained that no public official can be trusted to tell the truth about financial matters, ever. What will happen next? Nobody knows. Anybody with money had better understand this, since the safer an investment looks the riskier it is likely to be. Good luck suckers.
On the Mark August 1, 2009
R. Bono (Pennsylvania)
1 out of 1 found this review helpful
Frank Partnoy has made an important contribution to understanding our latest fiasco of Wall Street machinations. He knows it so well, because he was a player there, as a derivatives trader, during the formative days of this latest bubble. He saw it coming...and he makes it clear just how much greed, bloated selfishness, reckless risk, self-serving abstraction, lying, and narcissism have shaped the amoral behavior of the entire investment culture of the US economy....affecting the savings and aspirations of millions....not only in the USA, but throughout the world.
He presents his case chronologically...as one dissecting the gradual emergence of a medical disaster. It indeed was an economic health disaster, for which (Katrina like), there was no medical intervention by government...for that governmental immune response was part and parcel of the dysfunctional system, both unable and unwilling to recognize the disease for what it was. If "greed is good", as Gekko intoned, then everyone wanted to get on the action....and uninquisitive, overwhelmed, underfunded, and understaffed government was in no position to prevent anyone from getting their share of the booty of other people's money.
Partnoy divides his book into three stages of disease: "Infection, "Incubation" and "Epidemic". He is very detailed, and names names, as he delves through his post mortem. He is a clear writer, and relatively concise, considering the amount of specific information he imparts. He's prescient too, in that behavior seems likely to remain unchanged, unless checked by responsible government. And yesterday, as if to confirm it, we have the latest news that 5,000 investment bankers did indeed receive million dollar plus bonuses, during and after the TARP bailout. In the culture of money...the only thing that matters is money....not demonstrable performance....and certainly not public accountability.
I also like his ending....after dissecting the immense degree of professional culpability, from CEOs, to CFOs, to other high management, to lawyers, to capitalists, to government regulators...by reminding the reader that there is yet, one more person to share culpability...a person who, in vast numbers, also caught the fever....the reader....himself and herself.
An Infectiously Well Written History of the Financial Markets Over the Past Twenty Years February 19, 2009
Ubaid Dhiyan (Foster City, CA USA)
2 out of 2 found this review helpful
Infectious Greed: How Deceit and Risk Corrupted the Financial Markets is an unfortunately named book. It is just hard to take a book with such a dramatic title seriously. The author, Frank Partnoy, has another weirdly named book to his credit - "F.I.A.S.C.O.: Blood In The Water On Wall Street" - who came up with that?
Hmm, now with the bickering out of the way, I must warn you, do not let the title deter you from reading this excellent history of the financial and credit markets of the last twenty years - right up to its publication in 2003. The writing is comprehensive, scholarly, well researched (and footnoted) and, for a topic that can get rather convoluted, consistently interesting. As I read the first few chapters I kept telling myself I should have read this book in 2003, or even 2005 - Mr. Partnoy is remarkably prescient. His analysis and opinion of CDOs, SPEs, and all the other TLAs that structured finance engineers have been cooking up for the past twenty years is scathing. Ever heard of FELINE PRIDES? Look it up, it will make your tummy hurt. The second last chapter, on Enron, WorldCom, Global Crossing and the incestuous relationships they shared made me want to throw up.
I loved the book and I'm probably going to get a copy for my personal collection. Highly recommended.
Showing reviews 1-5 of 28
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