The Number: How the Drive for Quarterly Earnings Corrupted Wall Street and Corporate America, by Alex Berenson

Finance is not my forte, but I found this book both easy to understand and fascinating. Berenson attempts to explain how the bull market of the 1990s came about and the aftermath of the crash. He starts with a history of the Wall Street from its earliest days and follows the industry through modern times. Along the way he covers the formation of the S.E.C. (and its perennial budget problems) and the ethical collapse of the accounting industry. Enron, Tyco, WorldCom all get coverage here, as do the accounting firms and banks that were more-or-less partners in the frauds enacted on investors. After the historical groundwork, he addresses possible accounting and oversight improvements that would prevent future abuses. I found this to be less convincing as the answers seem to be mainly increased government oversight. More government is rarely a good solution to anything in my opinion; if any group is likely to be more corrupt than big business executives it is politicians.

For a book full of numbers, acronyms, and explanations of accounting methods, this is surprisingly readable. Berenson uses humor to offset the dryness of the topic, often to good effect. “Accountants like creating, merging, and disbanding trade groups almost as much as they like legal disclaimers.” “In Wall Street’s version of heaven, the strip clubs don’t have covers and every month is January.” Amusing stuff. I suspect that finance professionals (especially accountants) will be offended at the portrayal of the industry as largely self-serving, but for the average investor it provides a point-of-view that a broker certainly isn’t ever going to give you.

First Sentence:

It had been a very long week for J. P. Morgan Jr.