Review

In his vivid account of life as a derivative's trader for Morgan Stanley, Frank Partnoy examines the firms "there's blood in the water, let's go kill someone" attitude towards derivative sales.  Giving a true insider account, Partnoy reveals how derivates have been used by major investment banking houses for years  in deals he often compares to the money laundering schemes of the mafia.  In describing some clients such as Proctor and Gamble, Frank explains that what few people realized was that investors in these firms thought they knew what they were buying, but in reality their investment depended more on the companies derivates deals than on it's actual performance.

According to Frank Partnoy, the business of derivates sales was lucrative.  The goal was to "rip people's faces off", this meant basically making exorbitant fees on dangerous transactions, many of which should have been illegal.  Derivates allowed groups that could only buy premium bonds to buy bonds that appeared to be rated high, but in actuality possessed high risk.   Other uses of derivates included creating false profits for Japanese firms that had been hard hit, and as a way of relieving Morgan Stanley's other departments of unwanted investments.

The book is well written and the scope and span of the derivates business will amaze almost anyone.  Partnoy really goes in depth with his descriptions of several of the trades, and although this seems lengthy at times it does offer an excellent means of understanding why people buy derivatives, how they work, and why they oftentimes go sour.  The book does tout that it should stir fear in investors saying "you fail to read FIASCO at your peril," and after having read the novel, being an investor myself I will certainly take a little more heed of exactly what my investments involve.