The Seamy Side of Wall Street: An Insider’s View

Liar’s Poker: Rising Through the Wreckage on Wall Street

by Michael Lewis

WW Norton (1989)

Book Review

Like many of Lewis’s post-collapse books, this early memoir is simultaneously funny and educational. As with The Big Short and The Flash Boys (see Wall Street: More Deeply Corrupt than We Thought), my favorite aspect was the colorful personalities of the investment bankers Lewis worked with at Saloman Brothers between 1985-1988.

Like Lewis’s more recent books, Liar’s Poker teaches us a lot about the seamy side of Wall Street and investment banking.

Theoretically Saloman Brothers specialized in selling bonds, ie corporate bonds to finance corporate debt, Treasury bonds to finance federal debt and in their latter years mortgage bonds (bonds that enabled savings and loan associations to raise money to finance mortgages). In reality Saloman Brothers made most of their money “trading” mortgage bonds, ie encouraging investors to speculate in purchasing bonds in the hope their value would increase.

As Lewis describes it, he worked in a totally immoral environment in which traders routinely screwed over their clients to increase Saloman profits and their personal bonuses.

The chapter I found most enlightening concerns the role of the Federal Reserve in the collapse of the savings and loan industry in the late eighties.

I also enjoyed the chapter about junk bond* king Michael Milken. Despite Lewis’s obvious admiration for Milken, the latter would be indicted in 1990 for insider trading and racketeering. In return for testifying against former colleagues, the junk bond king was allowed to plead guilty to securities and reporting violations. Sentenced to ten years in federal prison, he only served two.


*Junk bonds are bonds issued by corporations determined to be high credit risks (unlike to repay their debts) by credit rating agencies, such as Moody’s and Standard and Poor.

 

4 thoughts on “The Seamy Side of Wall Street: An Insider’s View

  1. Ok, what else is new. Tubularsock has found that Las Vagus is more fair and sound than the markets!

    Tubularsock finds it humorous that people play that game still today and act like it is “responsible”.

    Who are they fucking kidding?

    Like

  2. Believe it or not, Tube, the share market in New Zealand is even more corrupt than Wall Street. There’s not even a pretense of regulation here. People with money invest it in real estate or in overseas share markets. That’s one of the reasons NZ is such a poor country. You have to give people the pretense of regulation or they won’t trust you with their money.

    Like

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