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Reviewed here: Fool's Gold, by Gillian Tett House of Cards, by William D. Cohan Street Fighters, by Kate Kelly

It seems easy in hindsight to write books about how the global financial crisis began, how it grew and almost ate the world - and still might. Yet to tell the tale well, which each of these books does, is not so easy. The amounts of data to be assembled and mastered, the complexities of the story and the shifting sands of blame make it a daunting task.

The broadest of the three books is Gillian Tett's Fool's Gold. Head of global markets coverage for the Financial Times in London, Tett focuses on J.P. Morgan, the repackaged House of Morgan, once the pillar of U.S. finance and still one of the most patrician investment banks on Wall Street. From the perspective of Morgan's derivatives business, and of chief executive officer Jamie Dimon, she explains how investment bankers, who had usually made tidy fortunes by peddling stocks and bonds for the biggest corporations in the United States, got down and dirty with the likes of Bear Stearns and Lehman Brothers, which, by comparison, were street fighters not averse to cooking up any sort of deal that would make money.

  • Fool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan was Corrupted by Wall Street Greed and Unleashed a Catastrophe, by Gillian Tett, Free Press, 294 pages, $34

In their books, financial journalist and former investment banker William D. Cohan and Wall Street Journal reporter Kate Kelly tell the story from Bear Stearns's point of view. Morgan absorbed Bear, so the stories are really those of the victor and the vanquished.

The unlikely marriage of upper-crust Morgan and scrappy Bear Stearns had its origin in competition to make new classes of assets and to increase profits as fast as possible. What Morgan and Bear Stearns, Merrill Lynch, Lehman, Bank of America and, before them, Bankers Trust and Citigroup and, most of all, insurance giant AIG created to make money was a new universe of assets whose value was derived from underlying securities. The new styles of derivatives were like the invention of money itself. The quantities manufactured were staggering. Tett counts $6-trillion (U.S.) held in various hedge funds and vehicles designed to get risks out of sight. That was more than half the total U.S. public debt before the bailout program began.

The new classes of debt had been put together with the aid of Russian physicists and mathematicians, among other financial engineers working on Wall Street. It was said that, unable to get research grants in the new Russia, they went to Wall Street and switched their jobs from making weapons that would wreck cities to weapons that would destroy fortunes.

  • House of Cards: A Tale of Hubris and Wretched Excess on Wall Street, by William D. Cohan, Doubleday, 468 pages, $33

What the back-office math wonks had really invented was a kind of financial Ebola that could spread and kill everybody. Tett shows how the concept of getting around the international banking agreements called Basel I required getting risk off banks' books.

Rather than keep those risks and tie up capital, Morgan and other investment banks sold them to investors. But the new, securitized deals, especially packaged subprime mortgages, became monsters of poorly understood risk.

In Tett's view, J.P. Morgan's contribution to the tower of risk was an asset called a BISTRO ("broad index secured trust offering"). The idea was that the new gimmick, based offshore in a tax-friendly haven, would insure parent Morgan against default on its mortgages. Defaults were expected to be low, the BISTRO or some other special-purpose vehicle could easily raise sufficient funds to cover the potential defaults, and Morgan could then sell packaged mortgages backed by its own insurance and make pots of money on each transaction.

Bear Stearns and other New York financial houses were doing the same thing.

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