Confidence Game: How a Hedge Fund Manager Called Wall Street's Bluff

Overview

The Warning and the Winnings

Confidence Game is a real-world "Emperor's New Clothes,"a tale of widespread delusion and one dissenting voice in the eraleading up to the worst financial disaster since the GreatDepression. Wall Street appeared to have found the secret forturning everything from risky mortgages to credit card bills intosuper-safe, triple-A-rated securities. Behind the facade of safety,the financial system had become dangerously ...

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Overview

The Warning and the Winnings

Confidence Game is a real-world "Emperor's New Clothes,"a tale of widespread delusion and one dissenting voice in the eraleading up to the worst financial disaster since the GreatDepression. Wall Street appeared to have found the secret forturning everything from risky mortgages to credit card bills intosuper-safe, triple-A-rated securities. Behind the facade of safety,the financial system had become dangerously fragile. Few hadanything to gain from pointing out the risk.

Bill Ackman did. In 2002, the hedge fund manager issued acritical research report on MBIA Inc., the owner of atriple-A-rated bond insurer that played a central role in thefinancial alchemy on Wall Street. "This company will spiraldownward," Ackman warned, and he placed a bet against MBIA thatwould earn his investors billions of dollars if it did.

The backlash was swift. Ackman was branded a fraud in the pressand investigated by Eliot Spitzer and the SEC. Despite thescrutiny, he spent years telling anyone who would listen why MBIAwas a catastrophe waiting to happen. With the onset of the creditcrisis, the problems exposed turned out to be bigger than MBIA. Anunquestioning acceptance of credit ratings, a blind eye toleverage, a dangerous reliance on financial models, and theabandonment of common sense had become part of a deeply flawedfinancial system. The collapse humbled nearly every large financialinstitution and plunged the country into recession.

Ackman's story captures an era of delusional confidence, whendebt exploded yet risk appeared to vanish. Told by award-winningbond market reporter Christine Richard, Confidence Game is abehind-the-scenes look at how warnings went unheeded as Wall Streetcareened toward disaster.

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Editorial Reviews

From the Publisher
"This a riveting account of a tenacious investor, incompetent/apathetic regulators & analysts and a company that hid information, deceived investors and used every connection it had in its attempts to silence him. At points this reads like a John Grisham novel … except it actually happened. For me, this is the best of the ‘melt down’ books to date … hands down."
— Todd Sullivan, valueplays.net, April 2010

" ... Ackman’s pursuit of MBIA spanned the two major crises of capitalism of the last decade, from the earlier era of corporate fraud prosecutions epitomized by Enron and its off-balance-sheet special purpose vehicles (SPVs), to the late credit debacle stemming from the collapse of the CDO house of cards."
—The Hedge Fund Law Report, May 2010

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Product Details

  • ISBN-13: 9780470648278
  • Publisher: Wiley
  • Publication date: 4/26/2010
  • Series: Bloomberg Series, #148
  • Edition number: 1
  • Pages: 335
  • Sales rank: 809,156
  • Product dimensions: 6.00 (w) x 9.10 (h) x 1.30 (d)

Meet the Author

Christine S. Richard has covered financial markets in Washington, Hong Kong, Singapore, and New York. Her work on the bond insurers received awards from the Society of American Business Editors and Writers, the Deadline Club, the Newswoman's Club of New York, the New York Press Club, the New York State Society of Certified Public Accountants, and the National Association of Real Estate Editors. Her articles were included in a series on the municipal bond market that was nominated by Bloomberg News in 2007 for the Pulitzer Prize. She lives in Frenchtown, New Jersey, with her husband and their daughter.

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Table of Contents

Preface.

Acknowledgments.

1 The Meeting.

2 The Short Seller.

3 The Question.

4 Backlash.

5 The Worst That Could Happen.

6 The Trouble With Triple-A.

7 Unanswered Questions.

8 Crimes And Cockroaches.

9 Turning The Tables.

10 Scrutiny.

11 The Black Hole.

12 The Court Of Public Opinion.

13 The Insurance Charade.

14 When Crack Houses Become Collateral.

15 Storm Warnings.

16 An Uncertain Spring.

17 Apocalypse Now.

18 Parting The Curtain.

19 Ratings Revisited.

20 The Panic Begins.

21 Catastrophe And Revenge.

22 Time Runs Out.

23 Bailout.

24 Judgment Day.

25 The Nuclear Threat.

Epilogue.

Notes.

Index.

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