Live chat with Michael Lewis
The author will be answering questions from Reuters.com readers on March 16
- Our live chat with Michael Lewis author of "The Big Short" is has concluded, but you can watch a replay by clicking the play button at the top of the column to the right of this post. You can read the questions asked and comments made during the event below.
- Here's a review of Lewis' new book by Hardy Green blogs.reuters.com
- Everyone knew the bubble would burst - was the bubble intentionally 'popped' by the Fed believing that they could 'control' the meltdown. All it would have taken is Greenspan, Bernanke and Paulson to whisper closed main lending switches at BofA, Wells Fargo and Goldman. That would start the chain reaction. So - where and exactly how did the chain reaction start? The impact, right at the end of the administration would poison the Obama Presidency and ensure a pendulum swing for 2012 and refund the bankers their lost loot at the expense of the taxpayers.
- Why credit Michael Burry as inducing Wall Street firms to offer credit default swaps against the failure of mortgage-backed derivatives? This was not good …… the CDO “insurance” was backed by reserves of as little as 3 cents on the dollar, and was merely used as another vehicle for making money. It too was a sham, and Burry had to know that insuring subprimes was an impossibility.
- Michael - after 25 years observing Wall Street and it's participants, what are and how would you prioritize the traits, skills, charateritics, background, etc of successful professional investors.
- on such a scale that it would prove ruionous? Something does not add up here. Did Goldman hard sell the idea of writing this insurance to some gullible idiots or what? How could thses people be so stupid?
- Did Dr. Burry talk Goldman Sachs into creating CDS's on mortgage bonds, and how did they convince AIG or whomever else to sell such mispriced insurance
- Can any one rationalize why CDS need to exist when all they are are ostensibly nothing more than a wager in the 5th race at Aqueduct? These have proven to weapons of massive manipulation and destruction with lasting repercussions. If someone truly wants to hedge credit risk, have them take out default insurance and pay the effective cost of an underwriter holding the capital reserve. Will it not eliminate the manipulation and volatility in the markets? Loss at the tables in Vegas do not have the far reaching implication as investment losses on the markets.
- Lets be very clear, CDS are not insurance they are bets without anything backing them up. There is credit default insurance, where and capital is held in reserve to cover the obligations.
- There is a material difference bewteen a credit default swap and credit default insurance. In the case of CDS there is no capital provide in support of the CDS, where as in the case of credit default insurance and the issuer of the insurance must set aside capital reserves.
- Thanks for the questions so far. Apologies for the delay in moderating them.
- Here's Felix Salmon's review of the book bnreview.barnesandnoble.com
- Have the financial markets been cleansed or are there more hidden problems we do not know about still imbedded in the system? How will these problems play out over the next year?
- Louis Ranieri was one of the most interesting characters in Liar's Poker.
I would very much like to know if Michael Lewis knows what Louis Ranieri's thoughts are on the securitised mortgage debt crisis ,since he was a major player in establishing the market for mortgage debt ,when he worked at Solomon Brothers.
I would also like to know if Michael Lewis or Louis Ranieri expected the crisis of Sept 2008 and after to unfold.I have great respect for Michael Lewis and Louis Ranieri.
Apologies for the indirect questions, but I have seen no interviews with Louis Ranieri thusfar. - All I want to know is...how do I play this newfangled market & MAKE MONEY?
- What legislation would you suggest to avoid this and similar debacles in the future?
- So the way I see it is that Wall Street is only gonna get smarter, making new toys to make money, and hide responsibility, and banning CDS is going to do nothing about it, so how do we change the culture, or are the quants going to keep coming, and keep inventing until they cause the next one?
- How does the average Jane or John Doe investor make modest gains in conservative invements such as CD's, when the Federal government has flooded the finanical markets with cheap money/loans? Will CD rates continue to hover around the 1 %- 1.5 %range?
- I would like to know at what point Michael believes the U.S. debt level will become unsustainable and how he expects the Global markets to react to default? In addition, how is this default likely to occur (i.e. technical default or debt deflation).
- Why doesn't Moody's and/or Standard and Poor's have a government regulatory board watching over what they say is a Triple A product? Those agencies clearly have no oversight what-so-ever.
- If AIG failed would Goldman Sachs have failed? If the bailout of AIG was directly related to saving GS then why didn't the government become more demanding of GS and limit the excessive bonuses paid in 2009.
- I only see opportunity. Which sub sector do I need to enter on Wallstreet for big money. Everybody has 24hrs, I want to maximize mine. Wallstreet is I think the best shot. It never get and will be regulated to prevent big money making. Mr Lewi, what is yr advise, on which doors do I have to knock?
- Once the fog of war has lifted after events like these and apparent victors emerge, do you truly believe that those that profited so handsomely, despite the convictions of their self assuredness, really saw the whole story play out from start to finish, and could do it again and again? Or is it just a case of it being their turn to win at the table this time?
- With the recent crevelation that Ernst&Young may have failed to reveal the true nature of Lehman's debt, do you think a lack of attention to detail from an accounting perspective exacerbated the recent crisis?
- Lewis says that most people working at credit rating agencies would "rather be working at Goldman Sachs."
- "No matter what story I write about Wall Street, it gets turned into a how-to book," says Lewis
- "All of the people who succeeded in my book were oddballs." Isn't that why you chose them?
- When his new book will become available for Kindle. I tried to buy it yesterday, and it wasn't even an advance-order option.
- Follow up to his "financially incontinent society" quote: What is the equivalent of adult diapers?
- Fed "isn't smart enough" to have orchestrated the financial meltdown says Lewis.
- "A lot of people say they are contrarian, not a lot of people actually are," says Lewis.
- What is your view on the global efforts to ban proprietary trading from big investment banks? Hedge funds should occupy the role of market making / providing liquidity to public markets?
- "I used to think that investing is purely an intellectual activity. What I learned is that people who are so successful...they preserved their detachment from greater society," says Lewis.
- Lewis would want Philip Seymour Hoffman, Matt Damon and Seth Rogen to star in Hardy Green movie.
- we are not out of this yet... I am from Detroit and there are a large number of homeowners who are still under water a great deal. I believe there is still a moral obligation, neighbor to neighbor, to continue to pay your mortgage. However, is there a moral obligation to pay the bank? The only reason to continue to pay on a home that is 50% of the value you purchased is to not "screw your neighbor". Otherwise, why pay? Is it because you don't want to ruin your credit? Try getting credit from a bank when your house is under water. The bank made the same bet you did when they signed the mortgage. They got bailed out, you didn't. Unless inflation increases a great deal, aren't the banks still in serious trouble?
- After writing this book, what are your thoughts on regulation and how it could prevent future potential financial meltdowns? For example, was the UK government correct in suspending short sales during the financial crisis, or does that kind of one-sided regulation only serve to exacerbate and prolong theses types of bubbles?
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