by Michael Lewis
Focusing on a handful of savvy (and a few unscrupulous) traders, the
one-time Solomon Brothers trader turned author chronicles the financial
meltdown brought on by the subprime mortgage fiasco. Carefully sifting
through the deliberately euphemistic lingo of Wall Street such as
“mezzanine” for high risk loans and "tranches" for gradations of risk
rating, and bewildering acronyms such as CDO (Collateralized Debt
Organization) and CDS (Credit Default Swap, a sort of insurance on
trades), Lewis tells how his principal characters realized how hollow
and corrupt the money machine was, and how no one listened when they
pointed out the madness, though they did all get very rich for their
perspicacity. From Wall Street’s manipulations of credit ratings so that
obviously risky loans were rated AAA to the charts that assigned an
asset’s value based on previous value rather than obvious external
factors, a myriad of shortcuts and hedges made sure that the big banks
deliberately remained blind to the coming financial implosion.
Although this book is not as entertaining as his chronicle of his few years as a trader, Liar's Poker,
Lewis does a tremendous job making the deliberately abstruse world of
credit default swaps clear, and he profiles several interesting people
in the financial world, putting a human face on Wall Street. Really,
though, while it’s a well-produced piece of investigation, this is an
awful story. As Lewis remarks in the prologue, there is no learning
curve if those who lose billions and make horrible money decisions are
rewarded no matter what they do. All the traders who pushed subprimes,
the CEOs of the failed banks – they’re all still doing fine. The machine
is broken, and as long as people view Lewis’ exposes as a "how-to
manual," as he notes many hungry wanna-be traders regarded Liar's Poker, it will never get fixed.
four stars
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