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Paulson Plays Chicken, Rich Get Richer in Best Business Books

Henry Paulson, former U.S. treasury secretary, testifies at a House Oversight and Government Reform Committee hearing in Washington, D.C., U.S., on Wednesday, Jan. 27, 2010.
Henry Paulson, former U.S. treasury secretary, testifies at a House Oversight and Government Reform Committee hearing in Washington, D.C., U.S., on Wednesday, Jan. 27, 2010. "On the Brink: Inside the Race to Stop the Collapse of the Global Financial System" is the latest book by Paulson. Photographer: Joshua Roberts/Bloomberg

Dec. 20 (Bloomberg) -- “Mr. President, we’re going to move quickly and take them by surprise,” the U.S. Treasury secretary told George W. Bush. “The first sound they’ll hear is their heads hitting the floor.”

Those lines come from Hank Paulson’s memoir, “On the Brink,” one of the best books on finance and economics that I read this year. The place was the Oval Office. The date, Sept. 4, 2008. Paulson, a tough-talking Christian Scientist and former head of Goldman Sachs Group Inc., was proposing to seize control of Fannie Mae and Freddie Mac, ousting their bosses.

Of all the meltdown books released in 2010, Paulson’s mesmerized me most. Equally imposing was a clutch of business-related biographies and histories. Here are my favorites.

Best Inside-the-Crisis Book: “On the Brink” by Henry M. Paulson Jr. (Business Plus).

Taking us behind the scenes, Paulson shows, day by day, how the U.S. government and Federal Reserve got sucked into a vertiginous game of chicken with Wall Street bankers, hedge fund managers and lawmakers. He captures the sleep-deprived haze of the rescue squad as the system seized up.

Runners-up: “The Big Short” by Michael Lewis (Norton/ Allen Lane); “The Quants” by Scott Patterson (Crown Business/Random House Business); and “Crash of the Titans” by Greg Farrell (Crown Business).

Best Crisis Book by an Economist: “Fault Lines” by Raghuram G. Rajan (Princeton).

The University of Chicago economist predicted the crisis two years before it hit. Like Cassandra, he was mocked. We can only hope policy makers will heed him now.

Rajan says bankers, the government and the Fed were all to blame for the disaster. Yet the more disturbing reality is that they were just responding, he says, to three “fault lines”: domestic political pressures, trade imbalances and incompatible financial systems. Those treacherous fissures remain.

Runners-up: “Crisis Economics” by Nouriel Roubini and Stephen Mihm (Penguin Press/Allen Lane); “Freefall” by Joseph E. Stiglitz (Norton/Allen Lane); and “13 Bankers” by Simon Johnson and James Kwak (Pantheon).

Quirkiest Crisis Book: “Diary of a Very Bad Year” by Anonymous Hedge Fund Manager, n+1 and Keith Gessen (Harper Perennial).

One Sunday in September 2007, Gessen says, he sat down outside a Brooklyn coffee shop with a Hedge Fund Manager who will remain anonymous. Gessen, a novelist, says their talks continued throughout the crisis, leaving this surreal record of acumen, despair and a description of how JPMorgan Chase & Co. “harvested the organs” of Bear Stearns Cos.

Runner-up: “I.O.U.” by John Lanchester (Simon & Schuster; published as “Whoops!” by Allen Lane).

Best in Narrative History and Biography: “American Colossus” by H.W. Brands (Doubleday) and “The Hellhound of Wall Street” by Michael Perino (Penguin Press).

Brands shows how capitalism triumphed over U.S. democracy in the decades after the 1865 Confederate surrender at Appomattox. He fills his vast canvas with Gilded Age magnates, gold prospectors and transcontinental railroad builders.

Perino takes us into the 1933 Senate hearings where Ferdinand Pecora, a cigar-smoking former New York prosecutor, changed the relationship between Washington and Wall Street by shredding the reputation of banking legend Charles E. Mitchell.

Runners-up: “Adam Smith” by Nicholas Phillipson (Yale/ Allen Lane); “High Financier” by Niall Ferguson (Penguin Press/Allen Lane); “More Money Than God” by Sebastian Mallaby (Penguin Press/Bloomsbury).

Best in Business Journalism, Non Crisis: “Broke, USA” by Gary Rivlin (HarperBusiness).

Rivlin takes a creepy journey through “Poverty Inc.,” where the rich get richer by lending to the working poor.

Runners-up: “The Facebook Effect” by David Kirkpatrick (Simon & Schuster); “Priceless” by William Poundstone (Hill & Wang); “Crash Course” by Paul Ingrassia (Random House).

Best for Historical Context: “The Great Crash, 1929,” one of four books in “John Kenneth Galbraith: The Affluent Society and Other Writings, 1952-1967” (Library of America).

Regardless of how you feel about Galbraith’s political and economic leanings, “The Great Crash, 1929” remains a classic. Much of what you’ll find in this beautifully bound new edition will sound familiar, from the talk of a new era of prosperity and a property bubble in Florida to a market engorged with leverage and, after the crash, a U.S. president who summoned business leaders for solemn meetings. The book is worth (re)reading if only for Galbraith’s elegantly understated prose.

“The depression,” he writes, “was an exceptionally disagreeable experience.”

(James Pressley writes for Muse, the arts and leisure section of Bloomberg News. The opinions expressed are his own.)

To contact the writer on the story: James Pressley in Brussels at jpressley@bloomberg.net.

To contact the editor responsible for this story: Mark Beech at mbeech@bloomberg.net.

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