Diary of a Very Bad Year - Epilogue and Final Thoughts on the 2008 Crisis Retelling
This is the final post in my series retelling Diary of a Very Bad Year. Here’s the epilogue and my closing thoughts.
The epilogue
The book’s epilogue is short. Almost painfully short.
By the end of 2009, the U.S. economy had officially come out of recession. Some consumer spending numbers looked better. Some financial indicators pointed up.
But unemployment was still above 10 percent. The housing market kept falling. Most big banks paid back their TARP money, but mostly so they could avoid government scrutiny of their bonus packages. The actual goal of TARP, getting banks to lend again, didn’t really happen. Lending stayed depressed.
Ben Bernanke’s confirmation hearing for Fed Chair was the most contentious one anyone could remember. Eliot Spitzer came back as a newspaper writer to criticize how the New York Fed had caved to Wall Street during the worst of it. Goldman Sachs, after everyone got angry about their huge 2009 profits, decided to pay bonuses in stock instead of cash. A small concession.
And a Brooklyn jury found the original Bear Stearns hedge fund managers not guilty on all charges. One juror told the Daily News she’d happily let them invest her money.
The book ends with three quiet lines:
Things had more or less gone back to normal. The poor got poorer. The rich survived.
The coffee shop in Brooklyn where the first interview happened closed down.
And HFM left his hedge fund after more than ten years of nonstop work. He bought a house in Austin, Texas.
My thoughts on this book
I’ve read a bunch of books about the 2008 financial crisis. The Big Short. Too Big to Fail. Lots of journalism and analysis written after the fact, when everyone already knew how it ended.
This book is different because it’s happening in real time. HFM doesn’t know what’s coming next. In the early interviews, he’s cautiously optimistic. By the middle, he’s scared. By the end, he’s questioning whether his entire career was worth it.
That arc is something you can’t fake. No one writing from hindsight can capture the genuine confusion and fear of someone living through it while trying to make sense of billions of dollars in risk.
What I took away
A few things stuck with me.
Financial systems are built on trust, and trust breaks fast. The whole crisis basically came down to people losing faith that the paper they were holding was worth anything. Once that starts, it spreads like a virus. Bear Stearns didn’t go bankrupt because it ran out of money. It went bankrupt because nobody believed it had money anymore.
Smart people can be wrong for a long time before being right. HFM saw the subprime problems early. But being right too early in finance is the same as being wrong. Markets can stay irrational longer than you can stay solvent, as the saying goes.
Nobody learned the real lessons. That’s the most frustrating part of the book. By the final interviews, HFM watches the same banks go right back to the same risky behavior. Low margins, high risk, collect your bonus today and let someone else deal with the mess tomorrow. The system didn’t change. It just survived.
The human cost gets forgotten. The book mentions suicides, job losses, ghost towns in California and Florida. But the financial system recovered. The people on the margins didn’t. And that’s still true today.
Who should read this book
If you’re interested in understanding how money actually works, not the textbook version but the real version, this is one of the best books you’ll find. HFM explains complex financial instruments in a way that makes sense. He’s honest about what he doesn’t know. And the interview format makes it readable in a way that most finance books aren’t.
It’s also a good book if you want to understand why so many people are angry at Wall Street. Not in a political way, but in a “here’s what actually happened and why it’s reasonable to be upset” way.
Diary of a Very Bad Year: Confessions of an Anonymous Hedge Fund Manager is published by Harper Perennial (ISBN: 978-0061965548). It’s worth your time.
Thanks for following along with this retelling. If you want to go back to the beginning, start with the series introduction.
Previous: Chapter IX Part 2 - The Final Interview
This concludes the Diary of a Very Bad Year retelling series.