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Infectious Greed: How Deceit and Risk Corrupted the Financial Markets
From the bestselling author of F.I.A.S.C.O. , a
riveting chronicle of the rise of dangerous
financial instruments and the growing crisis in American business
The still-unfolding financial story is terrifying. One by one, major corporations such as Enron, Global Crossing, and Worldcom are imploding all around us, prey to a greed-driven culture and dubious or illegal corporate finance and accounting. Our financial system has suddenly reached a perilous crossroads.
In a compelling and disturbing narrative, Frank Partnoy brings to bear all of his skills and experience as a securities attorney, financial analyst, law professor, and bestselling author to tell the story of the rise of the trading instruments and corporate financial structures that now imperil the economic health of the country. Starting in the mid-1980s with the introduction of the first proto-derivatives, and taking us through such high-profile disasters as Barings Bank and Long Term Capital Management, Partnoy traces a seamless progression to today's dangerous manipulations. He documents how each new level of financial risk and complexity obscured the sickness of the company in question, and required ever more ingenious deceptions. The story becomes more alarming with each passing day, but Partnoy offers a clear vision of how we can step back from the precipice.
riveting chronicle of the rise of dangerous
financial instruments and the growing crisis in American business
The still-unfolding financial story is terrifying. One by one, major corporations such as Enron, Global Crossing, and Worldcom are imploding all around us, prey to a greed-driven culture and dubious or illegal corporate finance and accounting. Our financial system has suddenly reached a perilous crossroads.
In a compelling and disturbing narrative, Frank Partnoy brings to bear all of his skills and experience as a securities attorney, financial analyst, law professor, and bestselling author to tell the story of the rise of the trading instruments and corporate financial structures that now imperil the economic health of the country. Starting in the mid-1980s with the introduction of the first proto-derivatives, and taking us through such high-profile disasters as Barings Bank and Long Term Capital Management, Partnoy traces a seamless progression to today's dangerous manipulations. He documents how each new level of financial risk and complexity obscured the sickness of the company in question, and required ever more ingenious deceptions. The story becomes more alarming with each passing day, but Partnoy offers a clear vision of how we can step back from the precipice.
464 pages, Hardcover
First published April 3, 2003
39 people are currently reading
545 people want to read
About the author
Frank Partnoy
13 books71 followersFrank Partnoy is the author of F.I.A.S.C.O., Infectious Greed, and The Match King. Formerly an investment banker at Morgan Stanley and a practicing corporate lawyer, he is one of the world’s leading experts on market regulation and is a frequent commentator for the Financial Times, the New York Times, NPR, and CBS’s 60 Minutes. Partnoy is a graduate of Yale Law School and is the George E. Barrett Professor of Law and Finance and the founding director of the Center for Corporate and Securities Law at the University of San Diego.
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Displaying 1 - 17 of 17 reviews
May 28, 2009
Wow. I was concerned in the beginning because i was told that the math was pretty difficult in this book. However if you want to know, what the backs are doing in terms of risk and deceit in the financial marketplace, there is no better book. An eyeopener for sure. Think before Enron, before the latest crash. Banks going under, with billions of dollars at risk, changing the marketplace, creating and selling new financial products way ahead of the understanding of traders, CFO's, bank presidents, not to mention, us, the stockholders and regular investors.
March 9, 2025
This is an important book, and it was good to read it so long after the financial scandals described. The greed and criminality of accountants, bankers, lawyers and corporate executives it exposes are staggering. They were able and were enabled, thanks to deregulated financial markets and complex unregulated financial instruments to enrich themselves, suck money from the corporations they fed on and cripple shareholders. Few understood what they were doing, how it was done and what they cost entire economies.
If ever there was an indictment of rampant, unchecked capitalism this is it. And after this it continued triggering the great financial crisis that came close to wrecking the entire global economy.
This is a complex story. Frank Partnoy unravels it extremely well. If only more journalists had the financial acumen to do the same. If only politicians were bold enough to take on the greed and stupidity that brings our planet to its knees.
If ever there was an indictment of rampant, unchecked capitalism this is it. And after this it continued triggering the great financial crisis that came close to wrecking the entire global economy.
This is a complex story. Frank Partnoy unravels it extremely well. If only more journalists had the financial acumen to do the same. If only politicians were bold enough to take on the greed and stupidity that brings our planet to its knees.
May 10, 2012
So far so good. The $ values involved are over whelming and it certainly seems very hard to justify the amount of renumeration paid for the lack of tangible benefit created. But then that is the point the book is trying to make. I had no idea of how oddly some interest rates were calculated or how arbitrary the formulas used could be. It is quite a big book but oddly enough not overly wordy. I got lost in a few places in regards to who is who and how they were related to some of the institutions.
And now the book has been read.. Does greed have any limits? I guess not when people want to always have more than the next person.
And now the book has been read.. Does greed have any limits? I guess not when people want to always have more than the next person.
January 24, 2008
Incredible book about the recent (~20 years) history of the financial markets. Very good at explaining the alphabet soup of financial innovations like CDOs, and gives detailed accounts of big meltdowns, such as LTCM and Enron. Makes the recent subprime lending implosion understandable and predictable.
November 19, 2025
This remains one of the most prophetic and depressing autopsies of modern financial dysfunction ever written. Written in the immediate aftermath of Enron, WorldCom and the dot-com bust, it reads today like a prequel to 2008, and now again to the crypto/SPAC/AI-bubble collapses of the 2020s and 2030s. The derivatives scandals of the 1990s, the structured-finance mania of the 2000s, the crypto yield-farming Ponzi schemes of the 2020s – they are not separate events. They are the same disease, just wearing new clothes.
Partnoy’s central thesis is brutally simple: when financial innovation outpaces regulation and comprehension, and when gatekeepers are financially incentivised to look the other way, catastrophe is inevitable. The research is monumental – over 500 pages packed with internal memos, court filings, emails, and interview transcripts. From the early abuses of swaps at Bankers Trust and Procter & Gamble’s $157 million loss, through Orange County and Barings, Long-Term Capital Management, Enron’s special-purpose entities and prepay scams, all the way to the first waves of CDOs, Partnoy maps an almost perfect continuity of greed, opacity and regulatory capture.
The role of the rating agencies is particularly damning. Partnoy shows how Moody’s, S&P and Fitch were paid by the very issuers whose toxic products they were supposed to rate objectively. The more complex the instrument, the higher the fees, the rosier the rating. Sound familiar? It’s the exact same model that blessed subprime CDOs in 2007 and gave Terra/Luna’s UST an “A” stability rating in 2022. Gatekeepers didn’t fail; they were doing precisely what their business model rewarded.
Most infuriating is the legal aftermath – or lack of it. Again and again, multibillion-dollar frauds collapse into civil settlements, deferred-prosecution agreements, and wrist-slap fines paid by shareholders or insurers, while the architects walk away rich. The more sophisticated and “complex” the scheme, the lower the chance anyone sees the inside of a prison cell. As Partnoy painstakingly documents, prosecutors struggle with juries who can’t understand a credit default swap, let alone prove intent. Complexity became the best shield money could buy. Perhaps the only custodial sentence was the one who stole from the banks: Madoff
Yet the book is not just a catalogue of despair. In the final chapters Partnoy lays out clear, practical reforms: one example is companies to publish their results on their websites and in odd dates – rather than every 3 months – requested by regulators.
Two decades after it was written, Infectious Greed is more relevant than ever. The disease it diagnosed never went away; it just mutated. Every new generation of traders, bankers and regulators convinces itself that “this time is different,” only to rediscover that greed is indeed infectious, gatekeepers are still on the payroll, and the law remains deliberately lax against the most sophisticated crooks.
Partnoy’s central thesis is brutally simple: when financial innovation outpaces regulation and comprehension, and when gatekeepers are financially incentivised to look the other way, catastrophe is inevitable. The research is monumental – over 500 pages packed with internal memos, court filings, emails, and interview transcripts. From the early abuses of swaps at Bankers Trust and Procter & Gamble’s $157 million loss, through Orange County and Barings, Long-Term Capital Management, Enron’s special-purpose entities and prepay scams, all the way to the first waves of CDOs, Partnoy maps an almost perfect continuity of greed, opacity and regulatory capture.
The role of the rating agencies is particularly damning. Partnoy shows how Moody’s, S&P and Fitch were paid by the very issuers whose toxic products they were supposed to rate objectively. The more complex the instrument, the higher the fees, the rosier the rating. Sound familiar? It’s the exact same model that blessed subprime CDOs in 2007 and gave Terra/Luna’s UST an “A” stability rating in 2022. Gatekeepers didn’t fail; they were doing precisely what their business model rewarded.
Most infuriating is the legal aftermath – or lack of it. Again and again, multibillion-dollar frauds collapse into civil settlements, deferred-prosecution agreements, and wrist-slap fines paid by shareholders or insurers, while the architects walk away rich. The more sophisticated and “complex” the scheme, the lower the chance anyone sees the inside of a prison cell. As Partnoy painstakingly documents, prosecutors struggle with juries who can’t understand a credit default swap, let alone prove intent. Complexity became the best shield money could buy. Perhaps the only custodial sentence was the one who stole from the banks: Madoff
Yet the book is not just a catalogue of despair. In the final chapters Partnoy lays out clear, practical reforms: one example is companies to publish their results on their websites and in odd dates – rather than every 3 months – requested by regulators.
Two decades after it was written, Infectious Greed is more relevant than ever. The disease it diagnosed never went away; it just mutated. Every new generation of traders, bankers and regulators convinces itself that “this time is different,” only to rediscover that greed is indeed infectious, gatekeepers are still on the payroll, and the law remains deliberately lax against the most sophisticated crooks.
April 25, 2021
As a beginner in the world of finance, this was an excellent read. It gets a bit repetitive, but is nevertheless insightful into the level of corruption at play from Wall Street, to major corporations, to startups. Example after example of accounting magic at-play, and reading between the lines by industry participants in an effort to avoid regulation. Considering that this was published in 2003, it really doesn’t seem like much has changed .
June 22, 2023
I would highly recommend this book to anyone intrigued about the dubious practices of our financial institutions from the 90s through the late 2000s.
This really shines a light on why the United States boom-bust roller coaster occurs more frequently than it should.
This really shines a light on why the United States boom-bust roller coaster occurs more frequently than it should.
June 24, 2023
I read /Infectious Greed: How Deceit and Risk Corrupted the Financial Markets/, by Frank Portnoy:
https://www.cairn.info/revue-finance-...
A well-researched book, but a bit laborious to read.
https://www.cairn.info/revue-finance-...
A well-researched book, but a bit laborious to read.
January 17, 2021
Starts off as an interesting premise but loses its way in middle. You end up with a feeling of having read lot of news articles.
March 24, 2016
Partnoy's key argument is that the appearance of control in financial markets is an illusion - the conventional wisdom that the collapse of 2008 was unique is wrong and the risk of a systemic collapse is still high (p3).
He attributes this to three major changes in financial markets (p4):
1) the use of financial instruments which are increasingly complex and traded off market;
2) the growing divergence between control and ownership of companies; and
3) the deregulation of markets and the inability of regulators to prosecute offenders.
While much has been made of the supposed benefits of financial innovation over the last decade, Partnoy argues that it was primarily driven by financial arbitrage and so served no useful purpose as well as contributing to the financial meltdown.
He reminds us that in January 1992 the president of the NY Fed Reserve warned that "the growth and complexity of off-balance sheet activities and the nature of the... risk they entail should give us all cause for concern." And how these comments were dismissed by commentators at the time.
Accounting standards also come in for criticism. Partnoy notes that two-thirds of CFOs said they had been asked to misrepresent financial results - and, concerningly, 20% of those admitted to doing so. (p204) And he is scathing about the role that inadequate standards for accounting for stock options played in fuelling the infectious greed of executives, arguing that many of the corporate frauds would not have occurred if stock options had not played a part. In a criticism that should be the subject of debate today, he argues that it was "twice as expensive for companies to pay their CEOs in stock options as it was to pay them in cash." (p213)
When discussing the role of regulation, Partnoy lambasts Greenspan who once told a senior regulator "I don't think there is a need for laws against fraud." (p262)
This edition was promoted as "revised and updated" from the original 2003 edition. Unfortunately there was not much effort by the author or publisher to do either. This meant that the rich material of the FCIC report was barely referred to.
Notwithstanding this, Partnoy's book is an engaging, informative and sobering read. Many of the issues he highlights are relevant now as countries try to construct a post financial crisis regulatory environment.
A rewarding and recommended read.
He attributes this to three major changes in financial markets (p4):
1) the use of financial instruments which are increasingly complex and traded off market;
2) the growing divergence between control and ownership of companies; and
3) the deregulation of markets and the inability of regulators to prosecute offenders.
While much has been made of the supposed benefits of financial innovation over the last decade, Partnoy argues that it was primarily driven by financial arbitrage and so served no useful purpose as well as contributing to the financial meltdown.
He reminds us that in January 1992 the president of the NY Fed Reserve warned that "the growth and complexity of off-balance sheet activities and the nature of the... risk they entail should give us all cause for concern." And how these comments were dismissed by commentators at the time.
Accounting standards also come in for criticism. Partnoy notes that two-thirds of CFOs said they had been asked to misrepresent financial results - and, concerningly, 20% of those admitted to doing so. (p204) And he is scathing about the role that inadequate standards for accounting for stock options played in fuelling the infectious greed of executives, arguing that many of the corporate frauds would not have occurred if stock options had not played a part. In a criticism that should be the subject of debate today, he argues that it was "twice as expensive for companies to pay their CEOs in stock options as it was to pay them in cash." (p213)
When discussing the role of regulation, Partnoy lambasts Greenspan who once told a senior regulator "I don't think there is a need for laws against fraud." (p262)
This edition was promoted as "revised and updated" from the original 2003 edition. Unfortunately there was not much effort by the author or publisher to do either. This meant that the rich material of the FCIC report was barely referred to.
Notwithstanding this, Partnoy's book is an engaging, informative and sobering read. Many of the issues he highlights are relevant now as countries try to construct a post financial crisis regulatory environment.
A rewarding and recommended read.
August 21, 2014
Took me a while to read this one, but ended up really enjoying it for what it is: an extremely detailed and well-researched history of the use of financial derivatives from the 1980's through the collapse of Enron, WorldCom and Global Crossing in 2000/01. Of course, the story of the book continues past it's conclusion, with the culmination of the world financial crisis in 2007/08. This book sets the table well for that episode. What I particularly appreciated was that the author named names - not just of CEOs or wrongdoers that were in the public eye, but of the unknown folks who were in the trenches and developed (or were suckered by) many of the derivative products which became the darling of financiers worldwide. The author can't tell a story as well as Michael Lewis, but he makes up for it through his depth of research.
November 3, 2012
Much better than many more recent books that get caught up in the personalities and characters involved in the financial crisis and ignore the institutional and political aspects of financial corruption.
If only people had listened to Brooksley Born...
If only people had listened to Brooksley Born...
July 23, 2013
(3.5)
September 17, 2011
Un libro imprescindible para entender cómo se gestó la crisis financiera de 2008.
October 17, 2013
As with all Partnoy's books, Infectious Greed makes it easy to understand the mechanics and in many ways the underlying grayness of the culture which keeps leading us to financial crises.
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August 4, 2016A fearless expose. -- The Times
Displaying 1 - 17 of 17 reviews