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Michael Lewis names an Icelandic architectural style and falls ill with journalistic outrage fatigue

I’ve delighted in Michael Lewis’ journalism ever since encountering his blunt, funny, observant book about the roadkill candidates of the 1996 presidential election. If he’s written a mediocre book before or since, I haven’t found it. Today, I started Boomerang: Travels in the New Third World. There’s so much I’d like to quote, but I’ll limit myself to three passages.

1) “… on top of several thick strata of architecture that should be called Nordic Pragmatic lies a thin layer that will almost certainly one day be known as Asshole Capitalist. The hobbit-size buildings that house the Icelandic government are charming and scaled to the city. The half-built oceanfront glass towers meant to house newly rich financiers and, in the bargain, block everyone else’s view of the white bluffs across the harbor are not.”

2) “To remain in the euro zone, they were meant, in theory, to maintain budget deficits below 3 percent of GDP; in practice, all they had to do was cook the books to show they were hitting the targets. Here, in 2001, entered Goldman Sachs, which engaged in a series of apparently legal but nonetheless repellent deals designed to hide the Greek government’s true level of indebtedness. … The machine that enabled Greece to borrow and spend at will was analogous to the machine created to launder the credit of the American subprime borrower—and the role of the investment banker in the machine was the same. The investment bankers also taught the Greek government officials how to securitize future receipts from the national lottery, highway tolls, airport landing fees, and even funds granted to the country by the European Union. Any future stream of income that could be identified was sold for cash.”

3) “The extent of the cheating—the amount of energy that went into it—was breathtaking. In Athens, I several times had a feeling new to me as a journalist: a complete lack of interest in what was obviously shocking material. I’d sit down with someone who knew the inner workings of the Greek government: a big-time banker, a tax collector, a deputy finance minister, a former MP. I’d take out my notepad and start writing down the stories that spilled out of them. Scandal after scandal poured forth. Twenty minutes into it I’d lose interest. There were simply too many: they could fill libraries, never mind a book. The Greek state was not just corrupt but also corrupting.”

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For background on why I value Lewis’ financial journalism, see this post of mine from back in March.

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The financial world has changed a lot since I worked in it and the biggest change is more people are playing with more of other people’s money. When most of the banks were partnerships, they had to be in it for the long run because people who were partners were playing with their own capital and taking risk with their own assets.

Emanuel Derman, formerly of Goldman Sachs. (via The Daily Dish)

Reading Derman’s words, I was struck — yet again — by how prescient Michael Lewis was way back in 1989. Here’s page 136 of Liar’s Poker:

“When the firm was a partnership (1910-1981) and managers had their own money in the till, loose controls sufficed. Now, however, the money didn’t belong to them but to the shareholders. And what worked for a partnership proved disastrous in a publicly owned corporation. Instead of focusing on profits, trading managers focused on revenues. They were rewarded for indiscriminate growth.”

Lewis put a finer point on things this year in the closing pages of The Big Short:

“At some point I could not help but ask John Gutfreund about his biggest and most fateful act: Combing through the rubble of the avalanche, the decision to turn the Wall Street partnership into a public corporation looked a lot like the first pebble kicked off the top of the hill. … The main effect of turning a partnership into a corporation was to transfer financial risk to the shareholders. ‘When things go wrong it’s their problem,’ (Gutfreund) said …”

I was touting The Big Short just yesterday to a guy I hadn’t seen in months. He, in turn, had great things to say about 13 Bankers, which I haven’t read yet. A website for that book is here.