‘Chasing Goldman Sachs’ is a compelling look at Wall Street

This book, author Suzanne McGee explains from the outset, is an attempt to analyze how the recent financial crisis was able to happen — rather than an account of what happened, like many other books that have emerged in the last couple of years.

Does she succeed? Only partly. The book from Random House, “Chasing Goldman Sachs: How the Masters of the Universe Melted Wall Street Down ... And Why They’ll Take Us to the Brink Again,” has many entertaining anecdotes and some insightful analysis.

However, although McGee, a financial journalist, frequently returns to her idea that the rest of Wall Street suffered from “Goldman Sachs envy” and aspired to have the business model, profit and bonuses of the bank, there is insufficient probing of the phenomenon.

There is no chapter, for example, examining how Goldman was able to do what it did so successfully, surely a vital prerequisite in a book called “Chasing Goldman Sachs.”

That said, the story is peppered with lively stories from the long history of U.S. investment banking. One of the best is also the most illuminating of the changed dynamics between Wall Street and corporate America on the one hand and the investment community on the other.

McGee tells how an investment manager at T. Rowe Price in Baltimore took the train to Manhattan in 2005 to see the salesmen at JPMorgan about buying private equity leveraged loans. Usually, the salesmen would have traveled to see the fund manager.

More surprising, the bank turned him away, saying it no longer needed an asset manager, who would ask too many questions. Instead, it was going to package the leveraged loans into collateralized loan obligations and sell them fast to hedge funds.

When it comes to the analysis, McGee can be perceptive as well as entertaining. There is a particularly compelling account of how regulators got sucked in to thinking the industry needed more freedom.

There is also a good historical sweep when she pinpoints the market flotation of Netscape, the Internet business, in the mid-1990s as a turning point for how banks treated investors and corporate clients. In essence, maximizing investors’ returns became more important.

But some of the other analysis is less successful — there is a vivid picture of the trouble in the analyst business model, for example, after the New York Stock Exchange’s Mayday reforms in 1975, when trading commissions were deregulated, destroying the subsidized model for analyst research.

As with McGee’s recurring theme of investment banking having moved away from utility services and toward self-interested trading, there is too much rose-tinted nostalgia for the “good old days” without questioning whether overpriced trading or advice were any more in the interest of business or society than today’s model.

The structure is also irritating. One minute, we are in 16th century Amsterdam, the next we’re being told about the cleanup after Lehman Bros.’ collapse, before darting to the market flotation of Google.

Key points, such as the creation and demise of the Glass-Steagall Act of 1933, which separated investment banking and commercial banking, are skated over.

Although McGee’s stated aim is different, there is also an inevitable comparison with some of the other books that have emerged on the subject — notably Andrew Ross Sorkin’s “Too Big to Fail,” Michael Lewis’ “The Big Short” and Gillian Tett’s “Fool’s Gold.”

With all of those, whether you are a career banker or a layperson, the accounts are readable and tell a compelling story, often in microscopic detail.

On balance, McGee’s book is full of entertaining and enlightening material that will appeal most to readers working on the edge of the financial services industry — who have some knowledge of Wall Street but are not insiders, and have not read other, livelier and more original accounts of many of the same events and issues.

Book reviewer Patrick Jenkins is the banking editor of the Financial Times of London, in which this review first appeared.