Michael Lewis (“Liars’ Poker”) is out with a book on what led to the housing bust. He’s one of my favorite financial writers so even though it’s not on Kindle, I’ve ordered “The Big Short”. Looks like a good read.
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Michael Lewis author of Liar’s Poker, is my favorite financial writer. He’s penned a column for Bloomberg that he thinks is tongue in cheek but you know what? He’s absolutely right.
Even as I write I am watching the eunuchs now posing as Wall Street CEOs bend over backward before some congressional committee to prove that the operation was a success, and they are now well and truly without testicles.
John Mack swore that he and everyone else at Morgan Stanley have only a secondary interest in money — that the guys at Morgan Stanley love to bank so much that if necessary they’d do it for free. Vikram Pandit went out of his way to apologize for ordering up a single corporate jet. “I get the new reality,” he said.
No, Vikram, you don’t. You think the new reality is cowering and simpering before elected officials so that they’ll quit being mean to you and maybe even let Tim Geithner give you more money. The new reality is that you need to grow a pair. Here’s how:
— Play the hand you’ve been dealt rather than the hand other people insist that you hold.
Pandit and Mack and the rest have completely swallowed “the people’s” line that because they’ve taken taxpayer money they are somehow now required to care how “the people” feel about them.
Think about this. Some fool comes along and gives you $15 billion, no strings attached. The fool doesn’t own you. You own him. Mack needs to stand up and say, “We at Morgan Stanley are pleased by your investment. Now, if you ever want to see a dime of it back, go away. We’ll call you if we need you.”
While I’d prefer to see corporate chiefs eschew my money, collected from me at figurative gunpoint, and save their companies or let them fail as their skills and market pressures allow, second best is to take the money and still stand up to the slugs who are forking over my dough to claim control over them. NASCAR’s in the dumps because car makers are now owned by the government and what would “the people” (there’s a joke) think if their money was spent on hospitality tents or new tires for Bobby Lee or whoever the hell drives those cars? No jets, except for Congressmen, no junkets, except for Congressmen and Barbara Streisand, no no no! I don’t really care about these wusses giving away their own freedom but I do care that this governmental power grab will extend into all our lives. So ignore Lewis’s sarcasm, boys, and, as he suggests, “grow a pair!”
Good article in yesterday’s Times by Michael Lewis on the state of Wall Street, its players and its regulators. It’s long but well worth reading in its entirety. Here are just a few of his observations:
The Madoff scandal echoes a deeper absence inside our financial system, which has been undermined not merely by bad behavior but by the lack of checks and balances to discourage it. “Greed” doesn’t cut it as a satisfying explanation for the current financial crisis. Greed was necessary but insufficient; in any case, we are as likely to eliminate greed from our national character as we are lust and envy. The fixable problem isn’t the greed of the few but the misaligned interests of the many. ….
OUR financial catastrophe, like Bernard Madoff’s pyramid scheme, required all sorts of important, plugged-in people to sacrifice our collective long-term interests for short-term gain. The pressure to do this in today’s financial markets is immense. Obviously the greater the market pressure to excel in the short term, the greater the need for pressure from outside the market to consider the longer term. But that’s the problem: there is no longer any serious pressure from outside the market. The tyranny of the short term has extended itself with frightening ease into the entities that were meant to, one way or another, discipline Wall Street, and force it to consider its enlightened self-interest.
The credit-rating agencies, for instance.
Everyone now knows that Moody’s and Standard & Poor’s botched their analyses of bonds backed by home mortgages. But their most costly mistake — one that deserves a lot more attention than it has received — lies in their area of putative expertise: measuring corporate risk.
Over the last 20 years American financial institutions have taken on more and more risk, with the blessing of regulators, with hardly a word from the rating agencies, which, incidentally, are paid by the issuers of the bonds they rate. Seldom if ever did Moody’s or Standard & Poor’s say, “If you put one more risky asset on your balance sheet, you will face a serious downgrade.”
The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.
These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.