Michael Lewis vs Fareed Zakaria

What’s coming for the big banks?
“I think they steadily become much more boring. I think they steadily attract a lesser caliber people to work for them and they pay less.”

“The people who created the problem are so powerful in deciding in what the solution to the problem will be.”

I’ll say it again. No one wants to make Liar’s Poker into a movie? How can this be?

Michael Lewis vs Fareed Zakaria

When a Giant Falls

Kottke has helpfully rounded up 13 articles about why GM failed including this one:

Seven reasons GM is headed to bankruptcy, Sharon Silke Carty, USA Today:

When GM realized how fast 1990s buyers were switching to trucks as personal transportation, it overreacted, pouring time and money into SUVs and pickups at the expense of car development. The result: As long ago as 2000, Wall Street was warning that GM could be overcommitted to trucks and wind up out of phase if the pendulum of buyer preference swung back to cars. Once consumer tastes began changing, the market was awash in new truck models, and profits were sapped by discounts needed to keep sales boiling.

When a Giant Falls

Michael Lewis and Warren Buffett – 17 Years Ago!

Somewhat lost in the internet hub bub (“OMG! He said what?” “Well, actually he didn’t“) around Michael Lewis’ The New Republic cover story/review of a new Warren Buffett biography, is his 1992 jeremiad about Buffett.

Most fascinating to me was a paragraph describing behavior of the financial markets from 1982-1992. Close your eyes and think he’s talking about 1999-2008 and it’s spooky how well it fits. Eventually we’ll figure out that you can’t just make money out of nothing. Until then, I guess we’ll just cycle through.

Still, in the short run he is probably right. You can frighten people into behaving themselves for a while. But in the long run he’s wrong. The financial revolution of the last decade introduced to Wall Street all sorts of temptations to abuse one’s position. When socially unproductive behavior pays as well as it has, it isn’t merely a matter of needing a few more good men. The dirty little secret on Wall Street is that the men responsible for its current reputation were not exceptionally bad. They were just ordinary people placed in unusual circumstances.

Also of note, and the thrust of the entire piece, is Lewis dismantling Buffett’s (at that time) pristine moral and ethical reputation with examples of deals Buffett cut seemingly at odds with his public statements. I had no idea Lewis wasn’t a fan of Buffett:

This modesty is inconsistent with Buffett’s vanity about his reputation as an investment genius. The main threat to this reputation–other than his performance, which has lagged the market during the past two years–is the strong academic evidence that success in the stock market is no different from success in a coin-flipping contest. The suggestion that he is merely lucky drives Buffett to distraction. He regularly ridicules skeptical professors with a vaguely thuggish if-you’re-so-smart-why-am-I-rich routine. (The reason he is rich is simply that random games produce big winners, but pity the business school professor on fifty grand a year who tries to argue with a billionaire.) While his little rhetorical victories may offer him short-term consolation, they also reveal the enormous pressure on Buffett to vindicate his precarious perception of himself.

Michael Lewis and Warren Buffett – 17 Years Ago!

A Bettors Explanation of the Economic Crisis

Also in the Bill Simmons Mailbag I mentioned yesterday, a Bettors Explanation of the economic crisis. By accident.

You just reminded me of something: There should be a section on eBay that allows the auctioning of enticing future bets. For instance, a few weeks before the NBA season, I placed $300 on 15-to-1 odds that Cleveland would win the 2009 NBA title. Those odds have dropped to 2-to-1. Not that I would (after all, Cleveland is going to win the 2009 NBA title), but shouldn’t I have the option to sell that $300 ticket on eBay? What if someone bid $1,200 on it (which would be a smart move because, again, Cleveland is going to win the NBA title) and I was guaranteed a $900 return on my investment? Should I take the money? This would be a fun Web site, you have to admit. And if eBay can’t do it, then why couldn’t the casinos themselves build a Web site that allows people to sell future tickets and get a second cut on the action? It all makes too much sense.

And then he gets called on it in part 2 of the mailbag.

Q: Just got done reading Part 1 of your mailbag. While your idea of auctioning off Vegas bets sounds like a great idea, do you realize that you just suggested the same scenario that ruined the mortgage industry and the entire economy?
— Tom, Pittsburgh

SG: Time for the greatest three-word comeback of all-time when you don’t have a comeback … yeah, but still!

A Bettors Explanation of the Economic Crisis

Michael Jackson Auction as Allegory for the Economic Crisis

Some of the items in this Michael Jackson auction are horribly undervalued and people are going to get amazing things for a song. I hope I’m one of those people and my wife hopes I am not. I guess the market is the market and what people are willing to pay is the actual value, but this is happening all over now from material goods to homes to companies on the stock market. And now remnants of Michael Jackson’s life.

Michael Jackson Auction as Allegory for the Economic Crisis

Taibbi Eviscerates Jake DeSantis

Taibbi’s take on Jake DeSantis, the AIG executive who resigned in the NY Times last week is excellent.
First this:

DeSantis has a few major points.
I have a few responses to those points. They are 1) Bullshit; 2) bullshit; 3) bullshit, plus of course; 4) bullshit. Lastly, there is 5) Boo-Fucking-Hoo. You dog.

And then this:

First of all, Jake, you asshole, no plumber in the world gets paid a $740,000 bonus, over and above his salary, just to keep plumbing. Second, try living on a plumber’s salary before you even think about comparing yourself to one; you’re inviting a pitchfork in the gut by even thinking along those lines. Third, Jake, if you were a plumber, and the electrician burned the house down — well, guess what? If you and that electrician worked for the same company, you actually wouldn’t get paid for that job.

(Via Twitter)

Taibbi Eviscerates Jake DeSantis

Geithner’s Plan Working Already!

Ahead of Geithner’s plan (which is a reworking of Paulson’s plan) Bank of America and Citi are buying up toxic securities in anticipation of selling them back to all of us at a marked increase. I don’t ask for much, but I hope this rescue plan doesn’t pass and BOA and Citi stay stuffed to the gills with all the shitpile they can eat.

Maybe this was the plan all along, get the greedy Citi and BOA to eat themselves to death, while at the same time cleaning up the balance sheets of everyone else. Geithner’s a genius. And I guess Citi and BOA aren’t using their TARP money to loan money like they’re supposed to. Oh well.

Geithner’s Plan Working Already!

Michael Lewis on AIG

Michael Lewis makes a lot of sense in his latest column for Bloomberg.com, but he’s also on the wrong side of the blame game. Blaming the,

Millions of people [who] borrowed money they shouldn’t have borrowed and, not, typically, because they were duped or defrauded but because they were covetous and greedy: they wanted to own stuff they hadn’t earned the right to buy

is simplifying the issue and lets the lending banks off the hook. It’s been said before, but it’s important to remember (and will become painfully clear over the next couple years) that in the bank/borrower relationship, the lending party has the upper-hand. Finally, as the one guaranteed financial professional in the relationship, the lending bank, frankly, should have known better.

But then this fascinating nugget:

Goldman Sachs, which received about 8 percent of the pile, or $13 billion, has claimed publicly that the money was, to them, a matter of indifference, as Goldman had hedged itself against a possible collapse of AIG — by making bets against AIG.

If I understand this correctly, Goldman was making bets against the insurance company it was paying to insure its bets. If that’s correct, is it any wonder we’re in the mess we’re in?

Michael Lewis on AIG