What happened to the global economy and what we can do about it
with 13 comments
By James Kwak
The Big Short is a good story and provides some illuminating lessons about Wall Street. Lewis doesn’t really come out and say what he thinks about Wall Street; he lets his characters do that for him. But in his recent interview with Christopher Lydon, he really lets loose. Here are some direct quotations.
Lewis: “The people who were responsible for orchestrating the crisis, because they’re on top and they’re in the middle of it, they’re the only ones who are sort of fluent in the language of it. I mean, who’s to question Tim Geithner, the secretary of the treasury, about this or that, because he’s the only with the information . . . even though he is clearly culpable in what happened.”
Lydon: “Not to mention Larry Summers and Bob Rubin and all the other architects of the deregulation. They’re still calling the shots in a new administration after a change of party management. It’s unreal.”
Lewis: “It is unreal, because basically all of the people you mentioned all swallowed a general view of Wall Street, which was that it was a useful and worthy master class, that these people basically knew what they were doing and should be left to do whatever they wanted to do. And they were totally wrong about that. Not only did they not know what they were doing, but the consequences of not knowing what they were doing were catastrophic for the rest of us. It was not just not useful; it was destructive. We live in a society where the people who have squandered the most wealth have been paying themselves the most, and failure has been rewarded in the most spectacular ways, and instead of saying we really should just wipe out the system and start fresh in some way, there is a sort of instinct to just tinker with what exists and not fiddle with the structure. And I don’t know if that’s going to work. When you look at what Alan Greenspan did, or what Larry Summers did, or what Bob Rubin did, there are individual mistakes they made, like for example not regulating the credit default swap market, preventing that from happening. But the broader problem is just the air they breathe. The broader problem is just the sense they all seem to have that what’s good for Goldman Sachs is good for America.”
***
Lewis: “The question is how does Washington move away from those institutions and make decisions that are in the public interest without regard for the welfare of these institutions. It’s a hard question because . . . this is the problem. Essentially the public and their representatives have been buffaloed into thinking that this subject — financial regulation, structure of Wall Street — is too complicated for amateurs. That the only people who are qualified to pronounce on this are people who are in it. And there are very very few people who aren’t in it in some way who have the nerve to stand up and fight it. . . .
“The elected representatives look at the financial system, I’m sure, and they think, it’s too complicated for me to understand, I’m going to be quickly exposed as a know-nothing if I take the lead on regulation, and in the bargain I’m going to miss out on all these campaign contributions from the financial industry because I’ll alienate them.”
***
Lewis, on Barack Obama: “He’s been captured by his banker, just like the ordinary American’s captured by their stockbroker. He’s been buffaloed by the complexity of it all, he doesn’t have time to sort it out for himself, and he has to trust the people who seem to know. The alternative is for him to set off on his own in a quixotic quest to reform the financial system without having any experience of the system. It’s sort of like the presidential version of regulatory capture, that he is at the mercy of the people who really don’t have probably his long-term best interests at heart but who seem to know what they’re talking about.”
Written by James Kwak
April 15, 2010 at 11:02 pm
Posted in External perspectives
I just listened to Chris Lydon’s interview of Lewis. I used to listen to R.O.S. quite a bit, I come and go with Chris Lydon’s interviewing style at times.
He does stop short of saying outright what I think more than the characters in his book recognized. Either way, this was a fun listen. I’d also recommend getting your ears on anything Gretchen Morgensen has done as well
Thanks
Paul Richardson
April 15, 2010 at 11:44 pm
And they still want to Blame Bush. These are all Democrat Machine insiders. Amusing. Any reform for Fannie / Freddie? Fannie/Freddie removed risk which caused market dysfunction. And, now Obama promises to the masses: Follow me and I will Provide Provisions and Remove Risk. The Democrat Party wants a sea of sameness, and promises to create heaven on earth. This fallacy is expensive and dangerous.
Age of Idiocy.
Suhr Mesa
April 15, 2010 at 11:45 pm
Dude, you don’t seem to get it, do you? This isn’t about partisan politics, it’s about a system that is thoroughly broken and corrupted by the influence of money on everything that happens in D.C.
Idiocy is trying to color this with a red or blue brush. And isn’t particularly amusing. Rather sad, actually.
number2son
April 16, 2010 at 8:55 am
number2son nailed it. this is isn’t about Democrat or Republican because BOTH parties are heavily influenced to side with corporate America than with everyday Americans on key issues that impact US more than them.
In their defense, they kind of have to be. IT takes (on average) over $1.1 million to run a Senate campaign in this country and about 2/3 as much to run for Congress. That’s a pretty stiff fundraising whip if you ask me.
We gotta remove money from politics altogether. Otherwise, the organizations and corporations with all the money, control all the policy.
And it is sad. Not amusing at all, Suhr Mesa.
jay2hug
April 16, 2010 at 1:17 pm
Lewis on Obama: “He's been buffaloed by the complexity of it all, he doesn't have time to sort it out for himself, and he has to trust the people who seem to know.”
Come on, I don’t buy that. He has chosen to trust weasels like Geithner, Rubin or Summers. He could choose to trust Volcker, Yves Smith, Simon Johnson,…. There’s a long enough list of knowledgeable people with some integrity. That he has chosen to be guided by weasels speaks volumes about who he really is.
bungalowbill
April 16, 2010 at 12:26 am
I don’t believe ‘trust’ is the correct word. It has been a while since any major (U.S.) Federal political leader has demonstrated [selfless] patriotism.
Sacrifice and doing what is best for the nation is the responsibility of the ‘little people’.
JDM
April 16, 2010 at 12:52 am
Here, here! I think anyone in Obama’s position, dealing with the ridiculous size and complexity of the issues at hand, lean heavily on those around them. Its about who you surround yourself with and who has the ear of the President.
Unfortunately, I can’t stand half of the people he’s surrounded himself with — i.e. same old, same old.
jay2hug
April 16, 2010 at 1:19 pm
..instead of saying we really should just wipe out the system and start fresh in some way, there is a sort of instinct to just tinker with what exists and not fiddle with the structure.
That’s better than the impression he seems to want to give in stuff he’s written, like that Joe Cassano was the bad apple at AIGFP, or that the shorts are heroes (as opposed to just being among the smarter parasites).
Or like with this drivel:
Lewis, on Barack Obama: "He's been captured by his banker, just like the ordinary American's captured by their stockbroker. He's been buffaloed by the complexity of it all, he doesn't have time to sort it out for himself, and he has to trust the people who seem to know. The alternative is for him to set off on his own in a quixotic quest to reform the financial system without having any experience of the system. It's sort of like the presidential version of regulatory capture, that he is at the mercy of the people who really don't have probably his long-term best interests at heart but who seem to know what they're talking about."
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