Michael Lewis: Bipolar or Just 20+ Years Too-Late?

21 Mar

In Aruba still so don’t have the screenshot or transcript, but Michael Lewis is on Bloomberg here now talking about “The Big Short.”  He’s shifted back/forth more times than I can count after a week of vacay, what the hell?  Is he going senile or is it just me?

Let me know, seriously, I can’t possibly be alone in these observations, although you’re all amp’d on coffee and I’m still drinking vino, so, uh…


So apparently Lewis is of the idea that ibanks are “in the wrong” when their clients (*CalPERS*, *AIG* you get the idea) request X risk profile with Y rating, yadda yadda, and lo and behold, said banks, shocker, deliver the product.  Just because, as I’ve discussed and debated (Janet Tavakoli, Yves Smith, etc), if the VOLUNTARY counter parties (“clients”) to financial transactions are contractually committed to a bilateral deal, and INEVITABLY, one parties’ assumptions turn out to be wrong, or in any way, shape, or form divergent from said parties’ expectations, that is NOT – -NO SERIOUSLY, ABSENT BLATENT ILLEGAL BEHAVIOR – – THE FAULT OF THE COUNTERPARTY.  FUCKING PERIOD.

FD: I’m neither a lawyer or whatever.  Bring the criticism.


10 Responses to “Michael Lewis: Bipolar or Just 20+ Years Too-Late?”

  1. Ralph March 21, 2010 at 1:43 pm #

    Pretty sure Tavakoli says that sophisticated counterparties are responsible for their own due diligence. The underwriter of the securities is also responsible for due diligence, and if it didn’t exercise due care, the “sophisticated” counterparty may not be able to recover damages, since it had a responsibility, too. But now public money was used to bail counterparties, and the public is not sophisticated, so if due care wasn’t exercised by the underwriter, the public can recover money paid out. That money could be used to pay down AIG’s public debt, as a for instance. I like it.

    • Anal_yst March 22, 2010 at 9:38 pm #

      1. I’ve heard/read Tavakoli flip=flop on that issue, too lazy to find though.

      2. I’d have to see you expound on the idea expressed in your 2nd sentence to respond to that, but generally (oversimplification), the seller/underwriter pretty doesn’t have to outright lie. My guess – which has been reported in several instances – is that buyers were often just in over their heads. Who wants to read a 300 page CDO of MBS prospectus? How many buyers of such securities did, and actually understood what they read? How many pursued further research (e.g. loan-level data)?

      3. The Treasury/Fed should (and do, somewhere) employ financial sophisticated workers. Just because they mangled several aspects – under extreme pressure mind you – calls your last claim into question, but I’d like to hear you elaborate further before jumping to any conclusions.

      • Ralph March 26, 2010 at 4:38 pm #

        Pretty sure Tavakoli never flip-flopped on this. Perhaps your memory is at fault, but if you can find any proof, would love to see it.

        Regardig sentence number two that you ask about, the due diligence requirement is straightforward for both parties. Sophisticated investors can sometimes recover if they demonstrate reasonable due diligence and also demonstrate they were materially misled in a way that could not be discovered in the course of reasonable due diligence. It’s a high bar.

        Tavakoli has always maintained that and says the diffenence now is that public money is involed.

        But if you can produce something different…

  2. Ralph March 21, 2010 at 1:50 pm #

    To your question, don’t know about what M.L. was saying this week, but he seems to change his tune a lot according to J.T. (starts out below):


    “I was in the Salomon Brothers’ 1985 training class that Michael Lewis lampooned in his amusing book, Liar’s Poker. Imagine my surprise to see him billed as a trader on 60 Minutes, since he was actually a junior salesman. Well-heeled male peacocks strutted the trading floor, and junior salesmen were girlie-men, mere eunuchs serving their pashas.”

    “Michael hit the roof when I ribbed him about the mischaracterization.* Yet, in January 2007 he didn’t spare the “wimps, ninnies, and pointless skeptics” at Davos. I wasn’t at Davos (Michael wasn’t either), but he derided people who staked their reputations–as I staked mine–on the fact that the financial system was in peril.”

  3. Kid Dynamite March 21, 2010 at 4:14 pm #

    you’ll like this ROger Lowenstein piece: “who needs wall street?”


    “Asked about mortgage securities that Goldman both sold to clients and bet against, Blankfein, while expressing regret for what he admitted was improper behavior, added: “In our market-making function, we are a principal. We represent the other side of what people want to do.” He went on to say that when Goldman sells a security that subsequently goes up (i.e., on which the other party makes money), “we wish we hadn’t sold it.” So much for putting the customer first. ”

    the public, including guys like Lowenstein, who should know better, have absolutely ZERO understanding of fiduciary duty and Wall Street’s role. that’s a problem – because, as I’ve tried to explain, once people understand the casino, it’s better for everyone.

    i can’t shake the image of you in a lounge chair sipping a drink out of a pineapple while wearing a banana hammock… ugggh.

    • Anal_yst March 21, 2010 at 6:16 pm #

      1st. of all, it wasn’t a true Speedo, just my triathlon trunks, 2nd of all, you’re like the 5th person to send me that Lowenstein drivel, which I appreciate, because I agree, its fucking nonsense, and as usual, you’re absolutely right, KD.

  4. singing lessons March 21, 2010 at 9:54 pm #

    Well spoken. I never thought I would agree with this opinion, but I’m starting to view things differently. I have to research more on this as it seems very interesting. One thing I don’t understand though is how everything is related together.

  5. Charmaine Trefry May 30, 2010 at 2:02 pm #

    Outstanding blog post bro. This particular is just a exceedingly nicely structured page, just the wise information I was hunting pertaining to. Thank you


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