Book Review: Den of Thieves

In the Den of Thieves (Amazon,) author James B. Stewart provides a play-by-play of the rise and crash of Wall Street in the 80’s.

The 80’s were a beginning of a new era. The US government/administration was chock full for laissez faire free-marketers. Regan was at the helm and regulations were considered the enemy. Wall Street got punch drunk on junk bonds, leveraged buyouts, insider trading, portfolio insurance and what not. Investment bankers and traders mostly viewed the banks they worked for as a way to get rich personally – damn the “franchise.”

What really got on the SEC’s nerve was insider trading in stocks. For one, it was happening in the market they had total regulatory oversight over. And two, it was eroding the trust of retail investors in the market. So the SEC decided to stake everything on the one thing it could do – bring people who traded on inside information to justice.

And unlike the regulators of today, they did not shy away from sending some of those traders to jail.

Baird was immediately struck by the similarities between the insider-trading investigations and the Mafia cases he’d worked on. Like organized crime, the Wall Street suspects prized silence and loyalty over any duty to tell the truth and root out corruption. He assumed that a Goldman, Sachs partner, for example, would go to jail rather than implicate another partner at the firm. Also, as in organized crime investigations, there were numerous interlocking cases, and not enough investigators to pursue all the leads.

Sadly, nothing much changed. The junk-bond mania was followed by the dot-com bubble followed by the credit crisis. And the number of people who were actually punished for financial crimes kept going down. Rinse, repeat.

The book runs to almost 600 pages and is about the 80’s. So, it is not for everyone.

Recommendation: worth a read.

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