Don't try to tell Andrew Ross Sorkin that he wrote the definitive history of the Wall Street meltdown. The New York Times columnist and author of best-seller Too Big To Fail thinks it is far too early to pass judgment on what happened in the year that led up to the Great Recession.
That's why Mr. Sorkin is more than a little concerned that politicians and regulators are moving far too fast when it comes to setting new rules for capital markets, and may end up doing harm as they enact policies aimed at preventing another near-death experience for big banks and the global economy.
"In the wake of Lehman's failure, I shared this widely-held sense of frustration, this sense that something had to be done, quickly," said Mr. Sorkin, in Toronto Wednesday to give a speech and promote his page-turner of a book. "My concern now is that we are moving too quickly, as we still don't fully understand the underlying causes of the financial crisis."
The U.S. government is expected to pass new financial regulations in coming weeks, yet Mr. Sorkin points out that the blue-chip commission appointed by Washington to study the nightmare on Wall Street isn't scheduled to report back until next fall.
"If you look back at the Great Depression, you realize many of the reforms spawned by that crisis were put in place over several years. But we're a society with ADD, we want everything fixed yesterday," said Mr. Sorkin. He says new laws are being put in place without an examination of the roles played by central agents, such as a U.S. government that pushed home ownership, an unregulated derivatives market, and the credit rating agencies.
There is a disconnect between the public distrust of Wall Street and the muted reaction of the business community. The U.S. public remains very angry with bankers. But the banks' corporate clients - CEOs and money managers - don't share that sense of outrage. They still seem content with business as usual.
In a rush to impose new rules on a still-fragile sector, Mr. Sorkin is concerned the worst elements of the banking system could be preserved. He said new capital requirements are being set for banks at a time when cash-strapped European governments are major shareholders in financial institutions.
"It's perverse, but the final result of new rules for banks may be lower capital requirements, due to the dynamics of the sector," said Mr. Sorkin. He added that Canadian banks should serve as global role models, "and I don't understand why Washington doesn't have teams of politicians and regulators up here, trying to understand how your banks weathered the storm, because there are lots of lessons to be learned from Canada."
While there are calls for radical reform of Wall Street, including revisiting Depression-era laws that prohibited banks from owning investment dealers, the award-wining journalist sees corporate America opting to stick to the status quo.
"There is a disconnect between the public distrust of Wall Street and the muted reaction of the business community," said Mr. Sorkin. "The U.S. public remains very angry with bankers. But the banks' corporate clients - CEOs and money managers - don't share that sense of outrage. They still seem content with business as usual."
If Washington is looking for advice on reform, the most knowledgeable of players in Wall Street's meltdown may be executives considered too toxic to ask for help. Mr. Sorkin said that in the wake of their firms' collapse, former Lehman Brothers chairman Richard Fuld and Bear Stearns CEO James Cayne "have done a great deal of soul searching, and become very introspective."
Looking back at the storms that played out in 2008 - including the one fateful September weekend in New York City that saw Lehman fail and the rest of Wall Street peer into the abyss - Mr. Sorkin said he continues to be amazed by how little information was available to central actors in the drama, and the dynamics that drove decisions. There are fascinating passages of Too Big To Fail that take readers inside Wall Street's walnut-panelled boardrooms, and the author said, "We expect our leaders, in government, at regulators, in business, to be just a little bit superhuman. When you get inside the room with these people, it's revealing to find out how very human they are, how petty jealousies or a bad night's sleep can have a profound impact on their decisions."
