I think the title is from the publisher not author. At least so far I think the author wanted to show how products are developed and what were the factors behind the design and institutional reasons they developed.I'm about 1/3 through “Fool’s Gold” by Gillian Tett. It is about [at least so far] the development of swap, credit derivatives and other instruments through the eyes of J.P. Morgan. While they did not themselves start all of the products or become the largest in the business---they were too conservative---they did have a lot of involvement.I've learned a lot about how the drive to make respectable income for the unit within JP Morgan, which as a larger conservative entity did not look with much favor on the 'derivatives' group. I'd always seen these derivatives as products were 'out there' but not how they evolved.

Fantastic book. It goes on to show how these Structured Products and shadow banking were taken to different level by everyone else.

The inner workings of the credit derivatives group at JPM was interesting, although the re-cap of the financial storm that overtook the world in the last year is probably common knowledge to people in this forum. I liked the beginning of the book, as it brought me back to the time when I first entered this field and wondered at the never-ending proliferation of derivative types"In the humid summer heat, amid the palm trees and gracious arches, the group embraced the idea of a new type of derivative that would transform the wider world of twenty-first century finance"I also liked the fact the *business* (not just the controlling/risk function) was very clued in on the various risks involved, e.g. the funding gap on SIVs.. "This mismatch alarmed Winters. Such was his wariness that when he became deputy CEO of the investment bank, he slashed the $12 billion of credit lines that JP Morgan had already extended to other banks' SIV to a mere $500 million"

QuoteFool's Gold: How the Bold Dream of a Small Tribe at J.P. Morgan Was Corrupted by Wall Street Greed and Unleashed a Catastrophe I had to laugh at the title.First of all, JP Morgan "corrupted by wall street greed" JP Morgan is the poster boy for wall street greed.Second, "Fool's Gold": JP Morgan was of course one of the prime movers behind the creature from Jekyll Island (the Fed) which led to the pure fiat currency we have today. That was the catastrophe unleashed by JP Morgan

The recent book "A Colossal Failure of Common Sense" talked about Lehman's use of VaR and its problems. But it made me think of another dirty secret in financial firms that gets almost no attention.That is the analysis of the models and their implementation. Risk groups and even more so QA [Quality Assurance] groups are assigned to test models and implementation more like the drunk who looks for his lost keys below the street light because there is light there.They and management want testing to cover a certain number of cases in a routine manner ['regression']and see if they differ from day to day. If they find something changed they tell the quant/programmer but have no concern about whether the new number is correct or not---just something changed. If the quant/programmer tells them it is o.k., that ends it. Many firms have Risk and QA act like automatons and not to understand or question the models, theory or anything deeper than 'are numbers the same.' In the rush to develop, programmers are told to produce develop an 'end application' that only allow testing by pressing keys and seeing the results---one at a time---and not provide drivers that allow unit testing of Risk and QA where thousands of cases can be run and, for example, Greeks can be calculated and 'never should happen' cases can be tested.Ivars Peterson wrote a book 'Fatal Defect: Chasing Killer Computer Bugs' that, while not oriented towards the financial industry, points out how failure to be creative in testing, look for things that could go wrong, try to 'break the system', test things that 'should never happen', and failure to have testers [Risk/QA] with the same education/training and compensation on the level of the developers [quants]. As the book points out death can result from his examples [X-Ray machines, airplane] but in finance millions if not billions can be lost---and careers destroyed. I've seen several cases where Risk/QA people wanted to understand what is being produced and test like Peterson points out, they are replaced because management does not want questions raised.