About four hundred of my closest friends (kidding of course) and Michael Lewis, Author of “The Big Short” sat down for lunch yesterday (March 30, 2010) at a Dallas World Affairs meeting here in Dallas.
Michael Lewis, a former Wall Street Salomon employee, now turned author, was interesting to me because he has some experience in the trenches of the financial world, mainly due to his stent at Salomon. Much to my happy surprise, the majority of Mr. Lewis’ discussion centered around Economics and the Financial happenings of the last two years, with only one question concerning Sandra Bullock’s role in his more glamorous, non-financial related book “The Blind Side.”
Here are a few of Michael’s thoughts that I found interesting:
“The winners who were correct in capitalizing on the shortcomings of the latest financial situation were rewarded, BUT, so were the losers.” Michael uses a Morgan broker example who was paid handsomely and is currently retired, who made a strategic bet with $15 billion in company capital and turned it into $5 billion in nine months time.
Michael reiterated the fact that Henry Paulson, former Goldman Sachs CEO, had a great objectivity problem with his position as Treasury Secretary while his former firm was in the cross hairs of the financial situation.
Concerning the AIG bailout and the misplaced insurance sold to other financial firms which ultimately was the undoing of AIG, Michael brought up a unique thought that with all the compromises, it was interesting that the government did not ask for a partial insurance payout to the counter parties of AIG, rather than a full 100% pay out which required considerable help by the US Government and ultimately tax payers.
“Change and regulation is coming”, which we have echoed before, but Michael added, “Much to many Wall Street Firm’s dismay”
And lastly, a thought that we keep in mind as professional investors, Michael through his experience at Salomon added, “If the financial companies at issue had been private, and owners held personally liable, I doubt much of the aggressive bets would have been made”
From Michael’s standpoint, I guess the event was a success, as I have added two of his books to my reading list and will tackle them shortly. I always try to remember that many times items may be Hollywood-ized in order to make them more interesting, but may still garner a few interesting facts for future reference.
Have a Good day!