The End of Liar's Poker?

Photoillustration above by: Ji Lee

In 1990 Michael Lewis wrote a book called Liar's Poker. It was a book about his four years at Salomon Brothers that came to an end in 1988, and I loved it. Loved it. I must have read it six times, and my dog-eared copy is still in a cardboard box in somebody's basement, an artifact from a previous life. My friends and I all read it. We memorized certain sections of it. (This was nothing new of course, as we had also memorized dialogue from 1987's Wall Street. One friend could rattle off Gordon Gekko's entire "Greed" speech by memory.) In 1990 I was 25 years old and had just started with Templeton Management. Two years later I would move to Fidelity Investments, and Lewis' book would come with me and occupy a place of prominence in whatever desk, cubicle or office I inhabited. Loved it.

Here's what the Library Journal review had to say:

As described by Lewis, liar's poker is a game played in idle moments by workers on Wall Street, the objective of which is to reward trickery and deceit. With this as a metaphor, Lewis describes his four years with the Wall Street firm Salomon Brothers, from his bizarre hiring through the training program to his years as a successful bond trader. Lewis illustrates how economic decisions made at the national level changed securities markets and made bonds the most lucrative game on the Street. His description of the firm's personalities and of the events from 1984 through the crash of October 1987 are vivid and memorable. Readers of Tom Wolfe's The Bonfire of the Vanities are likely to enjoy this personal memoir.

The reviewer is being kind. It's about greed, and ego, and avarice, and a culture where these vices were (and still are, apparently) praised as virtues. And I loved it. It was exciting.

Now, almost twenty years later, Lewis has returned to Wall Street to figure out what went wrong.

I thought I was writing a period piece about the 1980s in America. Not for a moment did I suspect that the financial 1980s would last two full decades longer or that the difference in degree between Wall Street and ordinary life would swell into a difference in kind. I expected readers of the future to be outraged that back in 1986, the C.E.O. of Salomon Brothers, John Gutfreund, was paid $3.1 million; I expected them to gape in horror when I reported that one of our traders, Howie Rubin, had moved to Merrill Lynch, where he lost $250 million; I assumed they’d be shocked to learn that a Wall Street C.E.O. had only the vaguest idea of the risks his traders were running. What I didn’t expect was that any future reader would look on my experience and say, “How quaint.”

Lewis' take on the current crisis is bathed in his well-earned cynicism. His view may be tainted somewhat, but I don't believe his analysis is. Anyone wanting a better understanding of the inner workings of Wall Street, and about how those characteristics have contributed to the current crisis should read this article. If you are unfamiliar with these workings, be prepared to be shocked. More to the point, this article needs to be read by those followers of Jesus who still believe the market was ordained by God, and will eventually save us. As George Bush said this week, what is needed is not more regulation, but better regulation. Right.

Read The End, by Michael Lewis. (Portfolio.com, by Conde Nast. Photoillustration above by: Ji Lee)
Language warning for the faint of heart. And lots of jargon, for the uninitiated. Let me know if you have questions.

Comments

[Maria]

Thanks for the link, Mike. For all the handwringing about the financial crisis, few are really willing to question the fundamental assumptions that got us into this mess. His analysis might be right or it might not, but he's asking the right questions. I suppose the follow on questions for those of us who follow Jesus would be -- how do we take a step back from the system that many of us are well entangled in? and how do we help our friends and neighbors put their hope in something more honest and just than the almighty market?