Some Merrill Lynch traders had a dark departmental secret: They called it the "Voldemort Book," says Greg Farrell in Crash of the Titans.
"Like the villain in the Harry Potter stories, the mere mention of it was discouraged," Farrell writes in his exhaustive and sometimes exhausting reconstruction of how Merrill sealed its own fate by becoming more bullish on bonuses than on America.
The "Voldemort Book" was a portfolio of more than $30bn (€22bn) in "super senior" collateral debt obligations that Merrill accumulated on its balance sheet after investors began shunning toxic mortgage instruments in 2007, Farrell says. The Risk That Must Not Be Named triggered a chain of losses and writedowns that would end Merrill's 94 years of independence, turn Bank of America into a temporary ward of the state, and wreck the careers of their chief executives.
Farrell, a Financial Times reporter, pieced together this fly-on-the-wall narrative from at least 250 hours of interviews, emails, confidential papers and transcripts from internal presentations at Merrill and Bank of America, which agreed to buy the securities firm on the momentous September weekend when Lehman Brothers crashed.
Merrill's downfall is often seen as a footnote to the dramatic demise of Lehman. It was far more than that, as this prodigious piece of reporting shows.
Framed as a financial thriller laced with ringing phones and expletives, the book shows how a firm famous for bringing Wall Street to Main Street lurched toward disaster while its chief Stan O'Neal was playing golf on Martha's Vineyard.
One theme running through these pages is how Merrill and other investment banks got into trouble by trying to match Goldman's profitability. Journalists have succumbed to a similar syndrome: Andrew Ross Sorkin envy.
In Too Big to Fail, Sorkin synthesized sharp anecdotes, dialogue and multiple storylines into a seamless narrative. Farrell's book, though engrossing, is short on the kind of cinematic details that make Sorkin's account so inviting.
While Farrell maintains a fast pace for long stretches, some chapters choke on minutiae and corporate history.