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When Wall Street -- and its chroniclers -- went crazy

As a postscript to my earlier items on Michael Lewis's book "The Big Short," commenter Tim37 points to this January 2007 column by Lewis that stands as possibly the most hubristic and condescending dismissal of Wall Street's critics that I've read.

In an odd way, that column only serves to prove the thesis of Lewis's book. But it's definitely not mentioned in Lewis's book. In fact, Lewis goes to great lengths to paint himself as prescient, reminding us both in the forward and the epilogue that he diagnosed Wall Street as a massive bubble in the 1980s.

By Ezra Klein  |  April 7, 2010; 3:15 PM ET
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he's actually right, in that people go (or went) to Davos and try to portray gravitas. From what we know now these guys clearly weren't acting on their professed concerns.

If we're being charitable towards Lewis, we could also say that he's not necessarily wrong about derivatives here. He is technically correct in saying that traditional derivatives don't create more risk. It's synthetic derivatives and off-market, illiquid bespoke derivatives that were the big problem. It's likely that Lewis didn't realize how much the synthetic derivative market dwarfed the traditional derivatives market. Few people did, since these were largely off-balance sheet items.

But again, that's the charitable view. His flippant tone makes it tough to sympathize.

Posted by: Quant | April 7, 2010 3:48 PM | Report abuse

He chronicles in Liar's Poker how he sold crappy bonds to unknowing investors willingly. Snake? He was young, but is that an excuse?

The redeeming feature of his new book is that he seems to have done a lot of actual, thorough reporting. That's not something you can say for his Bloomberg opinion pieces.

Ruben G.

Posted by: rglvr | April 7, 2010 4:12 PM | Report abuse

This is why I fed the feed for this blog. Few are willing to accept, and even link to, what might be differing points of view, or even facts that might weaken their argument. You have a liberal perspective, as do I, but you're interested in more than just the appearance of fairness.

Posted by: dlk117561 | April 7, 2010 7:31 PM | Report abuse

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