I’m not sure that Goldman is that qualitatively different, they were bigger, and could weather the storm better just based on inertia. But they still had to take what was in essence a $10 billion “payday loan” from Warren Buffett, and then hastily convert themselves into a commercial bank.

Devils Casino is an enjoyable read (Kindle app on iPad in my case). Of course, now that the bankruptcy examiner’s report on Lehman is available there needs to be either a new edition of the book or a new, more complete book incorporating those findings.

I’ve been reading a lot of books related to the Panic of 2008 (Colossal Failure of Common Sense is another take on Lehman, for example), but the best single book I’ve read is Too Big To Fail. As tough as the experience was on everyone, there is one part I especially loved. Some young bank official who has been putting in a string of 20 hour days says to his boss “I don’t think I can take it anymore” and the boss says “Oh come on, you’re getting out of a towncar at the New York Fed. It’s not like you’re getting out of a Higgins boat at Omaha Beach”. Kinda puts things in perspective.

“I thought it was Goldman Sachs, their main competitor. They were allowed to wither and die while GS got billions in bailout. Why? Could it be that most of people controlling the bailout strings were closely connected to GS?”

After reading To Big To Fail by Andrew Ross Sorkin I came to see that Lehman was just a weaker version of Goldman Sachs. They were far more exposed in riskier investments and just didn’t have enough cash on hand to survive the crisis. This caused a loss of confidence in the company and dried up all investors.

Even supposedly responsible firms like the Janus Funds (whose mutual funds are held in IRA and 401(k) accounts by millions of Americans) got caught up in the act. And when the bubble burst, Janus took a harder beating than some other firms like Fidelity.

After the “dot.com” bubble burst, it was revealed that Janus’ own proprietary mathematical pricing models had been warning their fund managers that these tech stocks were dangerously overpriced. But Janus’ managers proceeded to ignore their own proprietary mathematical pricing models, and continued buying shares of those companies anyway.

Just shows you that greed works like an addicting hallucinogenic drug: It blinds you to reality, and suckers you into ever greater doses.

Why weren’t other firms such as Goldman affected? Better connections within the Fed and the Treasury. I am not normally one to play into conspiracy theories. But when a company like Goldman Sachs emerges from a clusterf*ck of this magnitude virtually unscathed after being bailed out by Henry Paulson, their former CEO, I find it difficult to believe that everything was just related to chance.