Origins of the Crash: The Great Bubble and Its Undoing

FROM THE PUBLISHER

Roger Lowenstein, hailed by The New York Times Book Review as "one of the best financial journalists there is," now turns his focus to the 1990s stock market and economic boom and bust in Origins of the Crash. With his singular gift for turning complex financial events into eminently readable stories, Lowenstein lays bare the labyrinthine events of the manic 1990s -- including the collapse of Enron, the dot-com bubble, the accounting scandal at Andersen, and much more.

Drawing on his sense of history, Lowenstein inquires how a financial system that arose out of the wreckage of the Depression and that was intended to avert the miscues of that era could ultimately repeat the very same scenario of massive speculation and corruption leading to collapse. He discovers the roots of the recent crisis in the financial culture that emerged in the 1970s and 1980s as America encouraged companies to hand out ever-greater packages of stock options to their executives. In an enthralling narrative, Lowenstein ties together all of the characters of the great boom and bust: Alan Greenspan, Jack Grubman, Jack Welch, Abby Cohen, Henry Blodget, and a host of dot-com pioneers. But it is the collective rendering of such figures -- the unique portrayal of the culture of the era -- that truly distinguishes Origins of the Crash as the book that will frame our appreciation of the period. Just as John Kenneth Galbraith's The Great Crash was the canonical text of 1929, Lowenstein's Origins of the Crash is destined to be the definitive account of the 1990s.

FROM THE CRITICS

NY Times Book Review

Lowenstein's title may convey the impression that his book is mainly about stock prices. It isn't: it's about the epidemic of corruption that spread through corporate America in the 1990's, though that epidemic was in part both an effect and a cause of the bull market. A better title might have been ''Executives Gone Wild.'' As Lowenstein, also the author of Buffett and When Genius Failed, explains, not that long ago the orthodoxy at business schools -- one that corporate management found highly persuasive -- was that the trouble with American executives was that they didn't make enough money. Or, to be more precise, the problem was that they didn't stand to gain enough if their companies did well. The most famous of the business-school theorists, Harvard's Michael Jensen, wrote in 1990 that ''corporate America pays its most important leaders like bureaucrats. Is it any wonder, then, that so many C.E.O.'s act like bureaucrats?'' — Paul Krugman

New York Times

...Mr. Lowenstein is at the top of his game.

BusinessWeek

This book has the power to keep readers burning the Itty Bitty book light until the wee hours...

Publishers Weekly

Well-known financial journalist Lowenstein (Buffett; When Genius Failed) sets out to explain the stock market crash of 2000 and the ensuing corporate scandals. The ingredients are familiar: executive overcompensation and stock options, irrationally exuberant shareholders, friendly auditors, short-term focus by financial professionals and overemphasis on shareholder value. The author puts his unique stamp on these factors by juxtaposing them so brilliantly that the 20-year history that inflated the bubble seems not just understandable, but inevitable. The story is traced from the doldrums of the 1970s through the raiders and junk bonds of the 1980s to the financial brave new world of the 1990s. In self-conscious parallel to John Kenneth Galbraith's The Great Crash, Lowenstein explains that it is the boom that needs to be explained; the crash is simply the natural consequence. Lowenstein's low-key ease with the most complex financial reporting makes this book both accurate and easy to read, just as his earlier Buffett revealed a fascinating character where other writers saw only dullness, and his Where Genius Failed was a very comprehensible account of the 1998 Long-Term Capital Management blowup. (Jan.) Forecast: The author has two bestsellers to his credit on topics of much narrower interest. Unless the stock market jumps 20% before publication, this could be the top financial book of 2004. Copyright 2003 Reed Business Information.

Library Journal

Lowenstein, a well-known author and financial columnist, has crafted a lively and readable account of the last 30 years on Wall Street. Starting with the creation of 401(k) accounts, proceeding through the boom years of the 1990s, and then moving to the downfall of Enron and its brethren, he ties in the various factors that have inexorably led us to where we are today. While none of this is new information, Lowenstein includes enough personal details to make it seem fresh and interesting. The last chapters are particularly relevant, covering the fallout when the various deals and compensation scandals came to light. The effect of 9/11 on the government and the country in general is also touched on, particularly with regard to the rising budget deficit. Finally, an epilog discusses the fines and reforms (including the Sarbanes-Oxley Act of 2002) that resulted from the various debacles and opinions about what else must be done. The book is heavily documented throughout with quotes and sources, making it authoritative as well as informative. Recommended for public libraries.-Susan Hurst, Miami Univ. of Ohio, Oxford Copyright 2003 Reed Business Information. Read all 6 "From The Critics" >

WHAT PEOPLE ARE SAYING

Ron Chernow

Roger Lowenstein has delivered the perfect epitaph to an era of monumental avarice and folly on Wall Street. Origins of the Crash presents a chilling portrait of the collective lunacy and moral blindness that afflicted the stock market in the late 1990s. With swift, deft strokes, Lowenstein conjures up a rogues' gallery of corporate charlatans, craven accountants and lawyers, and complicit investment bankers that is guaranteed to make your blood boil, your mind race, and your soul recoil. This is financial history at its very best: knowing in its exposure of business trickery, sure in its grasp of market psychology, and eloquent in its fierce, but often poignant, sense of indignation. As newsboys bleated from every street corner after the 1929 Crash, 'Read it and weep. — author of The House of Morgan and Titan and the upcoming Penguin Press title, Alexander Hamilton

Arthur Levitt Jr