Liar's Poker: Rising Through the Wreckage of Wall Street. - book reviews

Washington Monthly, Nov, 1989 by Joseph Nocera

Liar's Poker: Rising Through the Wreckage of Wall Street Liar's Poker: Rising Through the Wreckage of Wall Street. Michael Lewis. Norton, $18.95. The apprenticeship of Michael M. Lewis began early one morning in 1985 when he stepped out onto the gigantic trading floor of one of Wall Street's most gigantic trading firms, the esteemed, prestigious house of Salomon Brothers. Widely considered the finest bond-trading house in the world, Salomon was awash in profits and prestige in 1985, and expanding madly, as was all Wall Street in those days. Lewis, like so many bright young men of the 1980s, was the lucky recipient of the firm's expansionist dreams: barely 25 years old, he had been hired straight out of the London School of Economics, practically sight unseen. After a brief training period, he, like the rest of his "class," was let loose on the trading floor, to begin learning the mysterious craft he had chosen as his profession: the trading of bonds.

Lewis sidles up to a veteran bond trader and tries to act inconspicuous. Quickly, however, he is spotted. A short colloquy ensues, which Lewis recounts:

Trader: What fucking rock did you crawl out from under?...

Me (reddening): I just wanted to ask you a few questions.

Trader: What the fuck do you think this is, a charity? I'm busy.

Me: Can I help in any way?

Trader: Get me a burger. With ketchup.

It is deeply, weirdly appropriate that Lewis's delicious memoir of his short, three-year stint at Salomon Brothers is published now, just as the sun is setting on the eighties. The eighties were, as much as any single thing, the age of investment banking. Investment bankers set the tone for the kind of pointless paper shuffling that became the decade's excuse for business activity; they had the kind of cachet that caused business school graduates to kill for entry-level positions; they became the stars of the business magazines, photographed in soft focus, and generally portrayed as icons of the culture, not to mention New York society. They even justified their own unconscionable fees (and bonuses) as a kind of ultimate vindication of their work: If the market paid them so well, then by God, they must be doing something socially useful. (Though God forbid you should ever ask them exactly what that might be.)

And now (heh, heh, heh) just as the decade is about to end, it's all falling apart. Junk-bond LBOs are defaulting, deals are going sour, Wall Street is finding profits rather more difficult to come by. Salomon Brothers, in a lovely, ignominious turn, was "put into play" by everyone's favorite nouveau cad, Revlon CEO Ronald Perelman. The crash notwithstanding, this has all happened with scarcely the hint of a recession on the horizon. Lewis's book offers as useful an explanation of why Wall Street is getting its deserved comeuppance as anything you are every likely to read.

The crucial point of Lewis's book, to my mind, is that no matter how bad you thought the investment banking culture was, it turns out to have been much, much worse. The last book to make this point was Ken Auletta's Greed and Glory on Wall Street, but Auletta's characters look like candidates for canonization compared to Lewis's. And Lewis is writing from the inside! Here he is, for instance, on status at Salomon Brothers:

"A new employee, once he reached the trading floor, was handed a pair of telephones. He went on line almost immediately. If he could make millions of dollars come out of those phones, he became the most revered of all species: A Big Swinging Dick. After the sale of a big block of bonds and the deposit of a few hundred thousand dollars into the Salomon till, a managing director called whoever was responsible to confirm his identity: 'Hey you Big Swinging Dick, way to be.'"

Here is Lewis on the relationship between Salomon Brothers and its customers:

"I had made the mistake of trusting a Salomon Brothers trader. He had drawn on the pooled ignorance of myself and my first customer to unload one of his mistakes. He had saved himself, and our firm, $60,000. I was at once furious and disillusioned. But that didn't solve the problem. . . . Bellyaching would. . . make me look a fool, as if I had actually thought the customer was going to make money on the [bonds]. How could anyone be so stupid as to trust a trader? The best thing I could do was pretend to others at Salomon that I meant to screw the customer. People would respect that. That was called 'jamming.' I had just jammed bonds, albeit unknowingly, for the first time."

On the way Salomon employees felt screwed at bonus time, no matter how much they were making:

"While [Lewis's boss] was explaining that I was paid more than anyone else in my training class. . . I was converting $90,000 into British pounds and putting them into perspective. It was certainly more than I was worth in the abstract. It was more than I had contributed to society; Christ, if social contribution had been the measure, I should have been billed rather than paid at the end of the year. . . . It was more than anyone else my age I knew made. Ha! I was rich. I loved my employer. My employer loved me. I was happy. Then the meeting ended.