It's in the Books: Greed Doesn't Work

Wall Street firms, which should know enough about hubristic financial bets and reversals of business cycles to know how to avoid them, somehow still manage to get snared as dramatically as anyone.

The latest example of this is the subprime loan fiasco, but examples abound in history. The question is, why? Books about Wall Street should give us insight into the innate flaw in financial institutions that leaves them vulnerable to financial fads, when they really should know better.

From Tom Wolfe's fictional Bonfire of the Vanities to more nonfiction that one can adequately count, including the recently released Blue Blood & Mutiny: The Fight for the Soul of Morgan Stanley by Patricia Beard, books tend to lay bare the top Wall Street firms.

Let's take a tour, looking for common themes and basic examples of why Wall Street is regularly hoisted by its own petard. The Merchants of Debt by George Anders is about Kohlberg, Kravis Roberts & Co. and the greedy, speculative fervor of the leveraged buyout, circa the 1980s. By today, we've had another round of greedy speculative fervor in leveraged buyouts, led in part by KKR, plus a pair in Internet stocks and that subprime debt, which obviously snared almost every major bank of Wall Street.

From books we learn that lessons of the past are not heeded and that the more things change, the more they stay the same -- both in terms of speculative fervor and even phraseology. In leading with deep background on Morgan Stanley, Beard touches on the origin of Anders' "Merchants of Debt" nickname for KKR. Anders repurposed the "Merchants of Death" label that a prominent senator gave Morgan Stanley after its successful but harshly criticized war financing during World War II.