Michael Lewis and Wall Street’s Doomsday Machine
Michael Lewis is out with a new book “The Big Short: Inside the Doomsday Machine” which discusses how the big hitters on Wall Street destroyed $1.75 trillion of capital.
His phrase ‘Doomsday Machine’ is reminiscent of former IMF chief economist Simon Johnson’s ‘Doom Loop’ phraseology which I reviewed two weeks ago.
Below, Lewis discusses his take on events with 60 Minutes. He focuses a lot less on criminality and looting and a lot more on a mass delusion caused by skewed short-term incentives.
Update: Lewis is also on Bloomberg talking about the same issues. Here he adds in a different spin on Greece and the currency default swaps debacle. Video below.
I don’t really disagree with much that Lewis says, but it all seems like blaming the lion for eating the wildabeast. Lions eat wildabeast, it’s what they do. Bankers are greedy.
I don’t blame the bankers (and I am using the term bankers really broadly) for blowing up the economy so much as I blame the government for creating the conditions that allowed the bankers to blow up the economy When you give away the dynamite and you don’t place any rules on the use of the dynamite, you shouldn’t be surprised when something gets blown up.
I think you know I focus a lot more on government’s culpability here as well. I wouldn’t give the banks a free pass in terms of culpability. But, the government has been derelict in regulating the industry both before and after the crisis. Where are the prosecutions, the perp walks. Where are the reforms?
Look at what Bill Black says about the FBI in this video I posted in the links. It’s criminal.
https://feeds.creditwritedowns.com/~r/creditwritedownsnews/~3/JstlvJFIjUA/steinhardt2010.html