Appreciation: Fool's Gold

There's every reason to that a book on the meltdown by Gillian Tett will be a profitable read. Covering credit markets for the Financial Times, she has had a front-row seat at the comedy. And her previous book (about the American takeover of a Japanese bank) was readable and instructive.

Fools Gold, her new book, is indeed worth the reader's effort, although it isn't quite as good as one might hope. A core difficulty is organization: for all her pretensions, Tett hasn't quite found a thread here, and the result is a narrative with rather less structure than either she or the reader might hope.

The problem might be with the editor. The subtitle is How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe--one of those longer-than-the-text titles that seem to be so much the fashion among marketers these days.

But it doesn't really hold up, for a couple of reasons. One: virtually all her sources seem to be the J. P. Morgan people themselves. So she tells a story that cries out for more context, and critical scrutiny. One would love to know what other bankers have to say, either about their own work, or about the claims of the J. P. Morgan crew.

And two: even if you accept every word of the Morgan story is true, you come up against the fact that the crew disintegrated very early in the game; that virtually all went on to other jobs and other lives; and that indeed Morgan itself never played nearly so prominent a role in the events leading up to the meltdown as many--most?--of its major competitors.

Turn this point around: after several absorbing chapters about the work of the Morgan innovators, the authority of the narrative forces Tett to change her focus. And indeed she does: onto the merged, reorganized, JP Morgan Chase, and its celebrity CEO, Jamie Dimond. Dimond is one of the few senior bankers who has come through the meltdown with his reputation more or less intact (in some ways, enhanced). On the evidence, he seems to deserve at least some of the acclaim he has enjoyed, although in a story this complex, a lot of it is surely do to others, and an uncountable portion to sheer dumb luck. One difficulty with Tett's organizational structure is that she tells part of this story, but not as much as one might want: since she thinks she is telling the story of the Morgan wunderkind, she doesn't seem to notice that her focus has shifted to the bank as a whole, and leaves parts of that latter story somewhat casually dismissed.

One virtue of the story that she does tell is that she raises a lot of tantalizing questions which, perhaps inevitably, she does not answer. For one: how did it happen in the first place? How did it happen that J. P. Morgan, of all places--which almost anyone would say had a reputation for being somewhat stodgy and unimaginative--how did Morgan come to put together such a fissiparous mix of talent? Or for another: how come Morgan, having filled the can with fireworks, succeeded in kicking it down the street--sidestepping precisely those hazards implicit in the new financial innovations that led other bankers to grief? Was it Dimon? Was it (whatever this means) "institutional culture?" Was it dumb luck?

Sales of books like Tett's make it clear that there is a market niche avid for accounts of exactly what went on, and how. One recent account--William D. Cohan's House of Cards, about the collapse of Bear, Stearns--is helpful, but impaired by the fact that Bear was such an outliner that its failure may not teach us very much. Tett may have the opposite problem: the story of Morgan is not central to the story of the meltdown, precisely because it avoided the worst excesses and escaped the worst calamities.

Tett remarks at the end that she bring something special to this task because she was trained as a social anthropologist gives her a distinctive concern for "wider social matters." I think she may overrate the value of the purely technical training: it may be simply that her concern for "wider social matters" was what led her to social anthropology in the first place. Still, it is true that she exhibits a feel for context that may not be typical among credit analysts or even journalists who report on credit analysists. Either way, it's to her credit that she has found a mix of text and context that allow her to tell her story in a matter at once satisfying and compelling.