After the stock market crashed in 2008, the vast majority of Americans lost jobs, money and livelihoods. Some people, though, struck it rich.
Author Michael Lewis spoke to Patt Morrison about the gamblers from the other side of the big Wall Street bet, the same people that are the subject of his new book, “The Big Short: Inside the Doomsday Machine.”
Lewis pointed out that the people that made money off of the collapse did in fact try to let someone know it was coming, but as dissenters, they were ignored and often hushed.
“They did call 911. No one answered. They go to the FCC, they go to the Wall Street Journal, they go to The New York Times… they screamed to high heaven,” he said.
“If you shoot the messenger you won’t get the message. One of the obscenities was [Wall Street’s] ability to shut out unpleasant, contradictory information opinion.”
Lewis explained that one of the simplest ways to look at the collapse was as a giant bet. The vast majority of brokers, including the major Wall Street firms, bet on the sub-prime mortgage bonds, while a few took the other side of the bet. The latter were of the few that ended up making money off of the collapse.
“These characters were narrowly happy to see the Wall Street firms take a beating, because they thought what they were doing was awful,” Lewis said, adding that their happiness was bittersweet.
“They were distressed by the effect on the wider world.”
Lewis also discussed the way the financial world has evolved over the last few decades. “It’s a very strange thing that’s happened in our society, but it’s a 30-year thing. This isn’t a three-year thing,” he said.
“This is the creation of a financial industry that doesn’t have much to do with productive enterprise that is a separate beast unto itself and needs to really be tamed. It’s a drain on capital. It’s a drain on human talent.”
Lewis associates Wall Street’s “squandering of millions of dollars of wealth” partially with a need for financial reform, something he says he’s hopeful the Obama administration will make a priority.
“The incentives that are in the financial system aren’t aligned with larger society’s interests. The financial reform is going to be unpleasant for Wall Street. It has to be,” Lewis said.
“The things that need to happen are essentially things that attack the revenues of financial system.”