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    Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
    Unavailable
    Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
    Unavailable
    Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
    Ebook735 pages15 hours

    Infectious Greed: How Deceit and Risk Corrupted the Financial Markets

    By Frank Partnoy

    3.5/5

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    Currently unavailable

    Currently unavailable

    About this ebook

    From the bestselling author of F.I.A.S.C.O., a riveting chronicle of the rise of dangerous financial instruments and the growing crisis in American business

    One by one, major corporations such as Enron, Global Crossing, and Worldcom imploded all around us, prey to a greed-driven culture and dubious or illegal corporate finance and accounting.
    In a compelling and disturbing narrative, Frank Partnoy's Infectious Greed brings to bear all of his skills and experience as a securities attorney, financial analyst, law professor, and bestselling author to tell the story of the rise of the trading instruments and corporate financial structures that imperil the economic health of the country. Starting in the mid-1980s with the introduction of the first proto-derivatives, and taking us through such high-profile disasters as Barings Bank and Long Term Capital Management, Partnoy traces a seamless progression to today's dangerous manipulations. He documents how each new level of financial risk and complexity obscured the sickness of the company in question, and required ever more ingenious deceptions. It's an alarming story, but Partnoy offers a clear vision of how we can step back from the precipice.

    LanguageEnglish
    PublisherMacmillan Publishers
    Release dateJun 3, 2014
    ISBN9781466872707
    Unavailable
    Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
    Author

    Frank Partnoy

    Frank Partnoy was a trader at Morgan Stanley before turning from gamekeeper to poacher and becoming professor of law and finance at the University of San Diego. He is one of the world's leading experts on the complexities of modern finance and financial market regulation and writes regularly for the Financial Times. He is the author ofF.I.A.S.C.O. [9781846682384], The Match King [9781861979384] and Infectious Greed [9781846682933].

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    Reviews for Infectious Greed

    3.5/5

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    • 2/5
      Frank Partnoy, author of this book and the very silly 'FIASCO: Blood in the Water on Wall Street', implies an illustrious career structuring and selling complex derivatives. In actual fact he worked on Wall Street for just two years in total, straight out of college. Instead of succeeding by staying the course, Partnoy made his millions by violating the Wall Street code of omerta and knocking out a sensationalist, mostly ignorant, account of the year or so he spent at Morgan Stanley. Infectious Greed is the follow-up, which purports to document the wreckage across the market since. Having read FIASCO, which was valuable mostly for its unintended humour, I didn't expect much of Infectious Greed; I was rather looking forward to slating it, to be honest. It has the same air of maiden-aunt prurience as FIASCO but, almost despite himself, Partnoy's conclusions here aren't especially objectionable, and mostly undermine the tone of studied outrage he cultivates throughout the early part of the book. The thesis of the book is that the financial markets have, of late, been corrupted by deceit and risk (hang on a minute: financial markets are *about* risk. Is it meaningful to say they can they be corrupted by it?). Yet at least half the book recounts events which took place ten or more years ago, in the primordial soup of the derivatives market. If a week is a long time in politics, a decade is an aeon on Wall Street: in 2004, the exploits of Bankers Trust and CS First Boston in 1993 aren't exactly current. The nascent derivatives market is now a mature trillion dollar industry. I dare say Professor Partnoy wouldn't recognise it. Partnoy's explanations of the transactions are, however, lucid: so much so that they undo his conclusions. At one point he describes in two paragraphs the 'whipsaw' risk of an 'Inverse IO' instrument. It's a very clear explanation, which completely undermines his concluding observation that 'it was unclear whether any mutual-fund mangers [the investors] understood all of this'. Here's the thing: to put not too fine a point on it, a professional fund manager who doesn't understand what can be lucidly explained in eight sentences, yet still invests in it, should be shot. So should his employer. And neither deserves the respect (for which, read, money) of the public. It might seem a harsh lesson, but it wouldn't take too many collapses to shake the mums and dads in Ohio out of their complacent stupor and shift their funds to a manager who was prepared to employ qualified managers and supervise them properly. The market has a way of teaching people valuable lessons that market regulation and government bail-outs really don't. The funny thing is, Partnoy does continually stumble over this axiom, but doesn't recognise it. He quotes a Peat Marwick partner who derides ignorant fund managers thus: 'if you don't understand, you might as well place it all on red at Atlantic City or Las Vegas, because at least there you get free drinks.' Though Partnoy doesn't think so, the analogy is a good one: the very monied nature of Wall Street is the most graphic illustration of the fact that, unless you really know your onions, you are NOT going to end up a winner. The house is; which is why most of them can afford to pay their 20,000+ employees salaries which average out at half a million dollars each (it's all in the annual report - do the sums!). Like Casinos, Wall Street trading desks have a motive ulterior to realising some poor schmuck's American dream: the object is to make, not lose, money, and this is exactly what they do and a statistically constant basis. Partnoy repeatedly calls for regulation of the derivatives market without ever making a case for how this might be done or how it would prevent the losses he documents in the book: criminal statutes don't stop people committing murder, after all. All the regulation in the world won't stop fraudsters (if they're committing fraud, then by definition the regulations are already there, and they're breaking them). On the other hand, exploring the idiosyncrasies of rules *without* breaking them is the prerogative of every citizen, not just Wall Street banks. After all, regulatory arbitrage is only possible because of prescribed regulatory rules tend not to precisely reflect economic reality. If rules have irrational boundaries, then it is economically rational to exploit them. Eventually, Partnoy acknowledges this. He cannot ultimately muster much venom for the perpetrators of the Enron debacle, and by the epilogue, where he sets out his recommendations (full marks to him for putting his money where is mouth is, by the way: it's one thing to criticise; quite another to suggest a solution) his proposals don't include regulation of the wholesale derivatives market ("some derivatives markets might appropriately have been left unregulated" he concedes) but simply equivalent accounting treatment with comparable financial instruments, and most of his fire is reserved not for Wall Street traders or greedy executives, but the credit rating agencies which operate under the umbrella of a government-sponsored oligopoly (only Moody's, Fitch and S&P are recognised for regulatory purposes). And you'll never guess what his solution is for dealing with the rating agencies: Without a hint of irony, he suggests they be deregulated! By the final sentence of the book, it seems the most elementary elements of market theory may have finally slipped through: Partnoy asks his readers whether they have taken any prudent steps to properly evaluate their investments before putting up any money: 'If you answered 'no,' you have one more person to blame in addition to the accountants, bankers, lawyers, credit raters, corporate executives, directors and regulators who failed to spot the various financial schemes of recent years. You.' Not, in the final analysis, quite the damning indictment it cracked up to be, then.

      1 person found this helpful