‘Too Big To Fail’ author speaking here

September 27, 2010
| By Pete Daly |
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The next great financial failure to rock the American economy may not be on Wall Street — it could be the government of a state such as California. But Grand Rapidians will get a chance soon to question the source of that opinion, who also happens to be the author of the New York Times bestseller, “Too Big To Fail: The Inside Story of How Wall Street and Washington Fought to Save the Financial System — and Themselves.”

Andrew Ross Sorkin, whose book “Too Big to Fail” came out in October last year, will be the keynote speaker Oct. 12 at the World Affairs Council’s 61st anniversary dinner at the Amway Grand Plaza Hotel.

Sorkin’s book is a behind-the-scenes account of how the financial crisis on Wall Street turned into a global economic tsunami. Sorkin said in writing the book he had "tried to bring to life the machinations, interlinking relationships, and even some of the duplicity among the various players involved while answering the big question — how did it all happen?"

In an interview with the Business Journal, Sorkin was asked if the “too big to fail” syndrome can occur again. He said the financial regulation bill signed into law by President Obama recently “should prevent the U.S. taxpayers from being held hostage” by large financial institutions in the future. He cited a provision within the bill called resolution authority, which gives the federal government the power to actually take over a failing investment bank like Lehman Brothers or AIG, “which is a power (the government) didn’t have in the fall of 2008.”

“How that tool will work in practice, we don’t know, because we’ve never tried it. But it should put us in a much better position,” he said.

As for the big banks today, they have recovered and resumed growing, to the extent that now, “I think they are almost too big to fail, squared,” said Sorkin.

However, Sorkin said he does not believe there will actually be another financial crisis on Wall Street in the next five or 10 years, ‘because the good news is, there is a lot less debt out there. People are a lot less leveraged, which was ultimately the biggest problem.”

That goes for corporations as well as the individual consumers, he said.

But, he noted, there is a major exception to his statement about less debt.

When he wrote the book, he said, he used the phrase “too big to fail” in the context of financial institutions, and the individuals who were running those businesses. 

“I thought they” — in effect, people — “were ‘too big to fail,’ but today, we now think about ‘too big to fail’ in the context of countries and states. … Now it’s about Greece. Now it’s about California.”

If there is another spectacular financial failure leading to a sequal of “Too Big To Fail” – which Sorkin hopes will not happen – “that’s where it will be; in the context of entire countries or states that get into trouble.”

“We have ended one problem but we have another looming, and it might even be bigger,” he said.

There is a “huge amount of debt” in California government, said Sorkin.

Indeed, AlixPartners, a global business-advisory firm that is involved with the restructuring of the bankrupt shell of the former General Motors Corp. (now known legally as Motors Liquidation Co.), conducted an informal survey a few months ago of restructuring experts that indicated that 90 percent of them believe a major U.S. municipality default will happen this year or next, while 63 percent think it will be a country.

Sorkin, 33, is a New York Times reporter who has appeared on CNBC’s Squawk Box, MSNBC's Morning Joe, Good Morning America, The Today Show, Real Time with Bill Maher and Charlie Rose’s show. At The Times, he covers mergers and acquisitions and writes a column on business and finance. Sorkin is also the founder and editor of DealBook, an online daily financial news service published by The Times.

The Economist, The Financial Times and Business Week all named “Too Big To Fail” one of the best books of the year.

Named a Young Global Leader by the World Economic Forum, Sorkin won a Gerald Loeb Award, the highest honor in business journalism, for breaking news. He also is a two-time winner of the Society of American Business Editors and Writers Award for breaking news. SiliconAlleyInsider.com called him one of New York's "most influential scribes," and Vanity Fair named him one of 40 new members of the "Next Establishment."

Sorkin began writing for The Times in 1995 before he had graduated from high school. He continued to write for the paper during his college days at Cornell and while studying abroad in London, publishing 71 articles on media, business and technology before he graduated. DealBook, which Sorkin created in 2001, began as one of the first financial news aggregation services on the Web. He developed it into an award-winning blog providing exclusive interviews, original analysis, and breaking news about mergers and acquisitions, IPOs, private equity transactions and venture capital deals.

Tickets to the Oct. 12 World Affairs Council fundraising dinner at the Ambassador Ballroom, which begins with a reception at 6 p.m., are $200 for council members and $250 for their guests. (Corporate memberships may already include complimentary tickets.) Call (616) 776-1721 for reservations.

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