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Wall Street's Doom Years in the Making

Liar's Poker writer saw this coming long ago, and so did some contrarian money men

By Kevin Spak, Newser Staff

Posted Nov 27, 2008 4:00 PM CST

(Newser) – When he wrote Liar’s Poker in 1989, Michael Lewis figured the end of Wall Street was near. After all, it had hired him, a 24-year-old with neither experience nor interest in finance. “Sooner rather than later,” he writes in Portfolio, “someone was going to identify me, along with a lot of people more or less like me, as a fraud.” Now, decades later, Wall Street’s stupidity has finally brought it low.

Lewis wasn’t alone in predicting the apocalypse; a group of contrarian short-sellers who looked at the huge collateralized debt market and mountains of subprime malfeasance saw the plain truth: “Wall Street had built a doomsday machine.” It began building it way back in the '80s, when Salomon Brothers went public. No employee-owned firm would have exposed itself to such risk. Or, for that matter, “hired me or anyone remotely like me.”

[Images (2)]

[Quotes (5)]

Wall Street collapsed like a house of cards, just as Michael Lewis always imagined it would. (Shutterstock)

Most of all, Michael Lewis still can't believe that someone like him could get a job in a Wall Street firm.

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The rebellion by American youth against the money culture never happened. Why bother to overturn your parents’ world when you can buy it, slice it up into tranches, and sell off the pieces? - Michael Lewis

I had been waiting for the end of Wall Street. Yet they just kept on growing, along with the sums of money that they doled out to 26-year-olds to perform tasks of no obvious social utility. - Michael Lewis

If you want to know what these Wall Street firms are really worth, take a hard look at the crappy assets they bought with huge sums of borrowed money, and imagine what they’d fetch in a fire sale.
- Michael Lewis

The arrangement bore the same relation to actual finance as fantasy football bears to the NFL. - Michael Lewis, on credit default swaps

We always asked the same question. Where are the rating agencies in all of this? And I’d always get the same reaction. It was a smirk. - Steve Eisman, hedge fund manager who bet on subprime's collapsing

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Wall Street's Doom Years in the Making