Infectious Greed: How Deceit and Risk Corrupted the Financial Markets [NOOK Book]

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Overview

As the global financial crisis unfolds people everywhere are seeking to understand how markets devolved to this perilous, volatile state. In this dazzling and meticulously researched work of financial history, first published in 2003, and now thoroughly revised and updated, law professor and financial expert Frank Partnoy tells the story of how “classical” Wall Street securities like stocks and bonds were quietly eclipsed by ever more “quantum” products like derivatives. He documents how, starting in the ...
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Infectious Greed: How Deceit and Risk Corrupted the Financial Markets

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More About This Book

Overview

As the global financial crisis unfolds people everywhere are seeking to understand how markets devolved to this perilous, volatile state. In this dazzling and meticulously researched work of financial history, first published in 2003, and now thoroughly revised and updated, law professor and financial expert Frank Partnoy tells the story of how “classical” Wall Street securities like stocks and bonds were quietly eclipsed by ever more “quantum” products like derivatives. He documents how, starting in the mid-1980s, each new level of financial risk and complexity obscured the sickness of corporate America, and how Wall Street’s evlving paradigm moved farther and farther beyond the understanding—and regulation—of ordinary investors and government overseers, leading inevitably to disaster.
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Editorial Reviews

The Washington Post
Partnoy has written an important book that provides a well-reasoned blueprint for fighting corporate corruption and restoring the integrity of America's financial markets. Unfortunately, it appears that the cops on Wall Street and the regulators in Congress are not ready to heed his advice. — Robert Bryce
Publishers Weekly
Partnoy's previous book, F.I.A.S.C.O., was an inside story of a Wall Street derivatives trader. It argued that recklessness and lack of regulation made derivatives trading (trading financial instruments that have no intrinsic value) a threat to the financial system. Turning from autobiography to history, this new work makes the same points by examining financial disasters caused by derivatives of the last 15 years. "Patient Zero" is Andy Krieger, whose $80 million mismarking of currency options embarrassed Bankers Trust in 1988. Partnoy profiles other derivatives abusers, too, including Nick Leeson, who bankrupted Barings Bank; Robert Citron, who did the same for Orange County; and Joseph Jett, whose "forward recon" trades helped end the independent existence of Kidder Peabody and Long Term Capital Management. These accounts of 20th-century disasters are neither original nor deep, but readers interested in the subject will be pleased to see the links among them. Taken together, common features emerge that are hard to see in detailed accounts of individual collapses. For example, Partnoy makes a revisionist case that credit rating agencies and federal regulators, including Alan Greenspan and Arthur Levitt, bear most of the blame. The author carries his story into mid-2002, evaluating Enron, WorldCom and Global Crossing. His analysis here is more original, reversing the popular perception by claiming Enron was a profitable company that should have survived, while WorldCom and Global Crossing had no economic substance. (Apr. 14) Copyright 2003 Cahners Business Information.
Library Journal
In this excellent backgrounder to current scandals, law professor Partnoy (F.I.A.S.C.O.: Blood in the Water on Wall Street) provides some valuable historical perspective on earlier problems on Wall Street. Partnoy walks the reader through the evolution of such financial innovations as currency swaps, structured finance, and proto-derivatives, showing how top Wall Street traders utilized them to fleece their clients while making buckets of money for themselves and their respective firms. He explores how traders, notably John Meriwether of Salomon Brothers and later Long-Term Capital Management fame, became wildly successful in their attempts at financial alchemy only to crash and burn later. The book clearly spells out how the misapplication of complex financial instruments such as derivatives, not to mention a grievous lack of governmental oversight, contributed to truly treacherous times on Wall Street. In the final analysis, this well-written, comprehensively documented book makes for compelling reading, much like James Stewart's Den of Thieves, which chronicled the Wall Street scandals of the 1980s. Recommended for larger public libraries.-Richard Drezen, Washington Post/NYC Bureau Copyright 2003 Reed Business Information.
Kirkus Reviews
With hours of expert testimony on Enron before Congress under his belt, Partnoy (Law/Univ. of San Diego) also draws on his own experience in selling the arcane contracts known as derivatives to put an investor’s dilemma into perspective. The author’s previous work, F.I.A.S.C.O.: Blood in the Water on Wall Street (not reviewed), warned of the dangers inherent in financial instruments created for the sole purpose of allowing companies to evade financial regulations. Here, he goes back some 17 years, naming the University of Pennsylvania’s Wharton School of Business, Bankers Trust, its CEO and chairman Charles Sanford, and his wunderkind, Andy Krieger, as key figures in the origination of the kinds of investment banking deals and "swaps" that eventually snared firms like Enron, Worldcom, and others. As the banks soon found out, the temptation for companies to place bets on interest or exchange-rate fluctuations in order to fund business ventures as cheaply as possible was irresistible from the start. Partnoy makes it appallingly clear that as these hedges against debt have evolved and become increasingly convoluted, the number of takers who will never understand them, much less profit from them, has continued to swell. For example: one structured note’s terms included a variable based on the number of wins by the NBA’s Utah Jazz. Partnoy makes a telling point in stressing that Enron’s deals and those of other now-scandal-plagued companies were basically not illegal and were all enumerated in annual reports in some occluded form or other. Perhaps the worst news for investors is that in Partnoy’s view the government’s response, last summer’s Sarbanes-Oxley Act, was "weak and limited" becauseCongress "had no blueprint" and was merely responding to public pressure to place blame. The markets today are "like Swiss Cheese," he claims, "with the holes--the unregulated places--getting bigger every year as [rules beaters] eat away at them from within." Riveting, for those who can persevere through the slack prose.
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Product Details

  • ISBN-13: 9781586488673
  • Publisher: PublicAffairs
  • Publication date: 9/8/2009
  • Sold by: Barnes & Noble
  • Format: eBook
  • Pages: 496
  • Sales rank: 905,885
  • File size: 552 KB

Meet the Author

Frank Partnoy is the author of The Match King: Ivar Kreuger, The Financial Genius Behind a Century of Wall Street Scandals, and F.I.A.S.C.O.: Blood in the Water on Wall Street. A graduate of Yale Law School, he is currently the George E. Barrett professor of law and finance at the University of San Diego.
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Read an Excerpt

From Infectious Greed:

By 2002, the closing bell of the New York Stock Exchange was barely relevant, as securities traded 24 hours a day, around the world. The largest markets were private, and didn't involve regulated exchanges at all. Financial derivatives were as prevalent as stocks and bonds, and nearly as many assets and liabilities were off balance sheets as on. Companies' reported earnings were a fiction, and financial reports were chock full of disclosures that would shock the average investor if she ever even glanced at them, not that anyone—including financial journalists and analysts—ever did. Trading volatilities were sky high, with historically unrelated markets moving in lock step, increasing the risk of systemic collapse.

In just a few years, regulators had lost what limited control they had over market intermediaries, market intermediaries had lost what limited control they had over corporate managers, and corporate managers had lost what limited control they had over employees. This loss-of-control daisy chain had led to exponential risk-taking at many companies, largely hidden from public view. Simply put, the appearance of control in financial markets was a fiction.

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Table of Contents

Introduction 1
1 Patient Zero 9
2 Monkeys on Their Backs 36
3 Wheat First Securities 62
4 Unreconciled Balances 84
5 A New Breed of Speculator 112
6 Morals of the Marketplace 141
7 Messages Received 187
8 The Domino Effect 227
9 The Last One to the Party 267
10 The World's Greatest Company 296
11 Hot Potato 350
Epilogue 393
Notes 413
Acknowledgments 447
Index 449
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Sort by: Showing all of 4 Customer Reviews

  • Anonymous

    Posted December 4, 2011

    Cheaper on amazon.com

    Why?

    Was this review helpful? Yes  NoThank you for your feedback.   Report this reviewThank you, this review has been flagged.

  • Anonymous

    Posted April 17, 2003

    Infectious Greed: How Deceit and Risk Corrupted the Financial Markets

    This is the definitive piece on Enron and everything that preceded it. I had no idea before reading this book how pervasive these problems were, how esoteric derivatives fit into the mix (and how much they affected so many stocks), how these problems persist and were generated in the first place, and how much more I need to pay attention to these issues in my own life. All of this is told is a very gripping and interesting way, with a sense of history and drama that is rare in nonfiction works. It is really a masterpiece.

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  • Anonymous

    Posted March 28, 2003

    this book is a MUST READ!

    I read a minimum of a 100 nonfiction business related books a year and this is without a doubt one of the greatest books written on the intersection between Wall Street, high tech, and a completely clueless Washington, D.C. (Of course the clued in Senators and Congressmen are a party to the crime, the 7 trillion dollar hold up of your average stock buying dumb American) The author explains complex subjects in a very interesting and easy readable way. He provides new information into the histories of acts of congress passing financial legislation they were clueless to enforce. He connects the dots between the major players. Finally he offers some advice and lets hope a few ¿honest Billionaires¿ help him out. Warren Buffet ain¿t gonna live forever. D.Matthew Hayden author Vegas Stories

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  • Anonymous

    Posted April 13, 2003

    Infectious Greed: How Deceit and Risk Corrupted the Financial Markets

    Just finished reading it. Incredible. Well-written, stunningly informative, and totally enthralling -- words that I can ever recall using to describe a book as sophisticated as this one. Totally stimulating. I wish that I had Partnoy as a professor in college; from how he writes, I bet he's incredible. This is an awesome book

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