Author Michael Lewis On Wall Street’s Collapse
Michael Lewis’ appearance on the March 14 episode of 60 Minutes offered a deconstruction of the nation’s mortgage crisis and brought to light how Wall Street, even today, continues to operate under a sense of entitlement. Lewis is the author of The Big Short: Inside the Doomsday Machine, a new book that attempts to explain how some of the brightest players in the investment world managed to destroy $1.75 trillion of wealth in the U.S. mortgage markets.
Lewis lays blames on a handful of Wall Street investment firms, including Goldman Sachs. In 2005, for instance, Goldman Sachs got American International Group (AIG) to insure $20 billion worth of mortgage securities that the ratings agencies had deemed AAA - the best of the best. In reality, the securities were toxic waste.
60 Minutes correspondent Steve Kroft asked Lewis point blank: “Do you think the big banks like Goldman Sachs played AIG for a patsy?”
“That’s exactly what they did,” Lewis replied.
Lewis also faults the credit rating agencies, which were responsible for rating the products that Wall Street created, for their role in the financial crisis of 2008.
The real insanity is that nothing has changed. Wall Street talks about reform but is slow to produce it. Transparency and oversight are bantered about in the media but that’s as far as it goes. The very financial instruments that brought down the world’s financial markets are still being sold to investors. As for the credit rating agencies, which are paid by the firms whose products they rate, little has been done to improve the transparency of their ratings.
The same thing goes for credit default swaps. “This market is the closet thing to ground zero, yet nothing has changed to make it more transparent,” said Lewis on 60 Minutes. “How can an investment firm advise clients on what to buy and sell while at the same time betting on those products to fail?,” Lewis asks.
Now that’s a question every investor out there wants an answer to.
Our affiliation of lawyers is actively involved in advising individual and institutional investors in evaluating their legal options when confronted with subprime and other mortgage-related investment losses.
