Michael Lewis, of course, is the author of The Big Short, The Blind Side and more recently Boomerang: Travels in the New Third World.

Asked if Wall Street should be worried about the protests: "They should be worried, this is how reform happens."

He also remarked that Occupy Wall Street "has justice on their side."

Preach.

Our leaders have framed the problem as a “crisis of confidence” but what they actually seem to mean is “please pay no attention to the problems we are failing to address.” - Michael Lewis

In today's New York Times, Michael Lewis, author of "Liar's Poker" and "Panic: The Story of Modern Financial Insanity", looks at the systemic intertwined interests (like the don't-rock-the-boat SEC) that kept Wall St. embroiled in such questionable and risky practices. As just one example among many, he points to the man who tried to stop Bernie Madoff for years:

... Consider the strange story of Harry Markopolos. Mr. Markopolos is the former investment officer with Rampart Investment Management in Boston who, for nine years, tried to explain to the Securities and Exchange Commission that Bernard L. Madoff couldn’t be anything other than a fraud. Mr. Madoff’s investment performance, given his stated strategy, was not merely improbable but mathematically impossible. And so, Mr. Markopolos reasoned, Bernard Madoff must be doing something other than what he said he was doing.

In his devastatingly persuasive 17-page letter to the S.E.C., Mr. Markopolos saw two possible scenarios. In the “Unlikely” scenario: Mr. Madoff, who acted as a broker as well as an investor, was “front-running” his brokerage customers. A customer might submit an order to Madoff Securities to buy shares in I.B.M. at a certain price, for example, and Madoff Securities instantly would buy I.B.M. shares for its own portfolio ahead of the customer order. If I.B.M.’s shares rose, Mr. Madoff kept them; if they fell he fobbed them off onto the poor customer.

In the “Highly Likely” scenario, wrote Mr. Markopolos, “Madoff Securities is the world’s largest Ponzi Scheme.” Which, as we now know, it was.

Harry Markopolos sent his report to the S.E.C. on Nov. 7, 2005 — more than three years before Mr. Madoff was finally exposed — but he had been trying to explain the fraud to them since 1999. He had no direct financial interest in exposing Mr. Madoff — he wasn’t an unhappy investor or a disgruntled employee. There was no way to short shares in Madoff Securities, and so Mr. Markopolos could not have made money directly from Mr. Madoff’s failure. To judge from his letter, Harry Markopolos anticipated mainly downsides for himself: he declined to put his name on it for fear of what might happen to him and his family if anyone found out he had written it. And yet the S.E.C.’s cursory investigation of Mr. Madoff pronounced him free of fraud.

Of course, Madoff was a relatively small part of the culture:

The American International Group, Fannie Mae, Freddie Mac, General Electric and the municipal bond guarantors Ambac Financial and MBIA all had triple-A ratings. (G.E. still does!) Large investment banks like Lehman and Merrill Lynch all had solid investment grade ratings. It’s almost as if the higher the rating of a financial institution, the more likely it was to contribute to financial catastrophe. But of course all these big financial companies fueled the creation of the credit products that in turn fueled the revenues of Moody’s and Standard & Poor’s.

These oligopolies, which are actually sanctioned by the S.E.C., didn’t merely do their jobs badly. They didn’t simply miss a few calls here and there. In pursuit of their own short-term earnings, they did exactly the opposite of what they were meant to do: rather than expose financial risk they systematically disguised it.

This is a fascinating piece, with lots of advice about what needs to be fixed to restore confidence in the financial system. (As you may have guessed, nothing substantive has been done yet.) Go read the rest.

I just ordered "Big Short," by Michael Lewis. I watched his 60 Minutes appearance and still wasn't sure if I would buy the book although it was a horrifying tale to be sure.

Felix Salmon convinced me otherwise in his review:

Amazingly, despite the fact that the book is so one-sided, it also functions as a peerless guide to exactly what went so very wrong in the credit markets generally, and the mortgage markets in particular, over the course of the last decade. It's not easy to explain synthetic subprime-backed collateralized debt obligations, but Lewis does an excellent job on both the micro level -- what these thing are, and how they worked -- and the macro level -- how the market in such exotica helped to destabilize the entire financial system.

Most impressively, Lewis has backed up his story with an enormous amount of old-fashioned reporting, spending a lot of time with the characters in his book and their families, as well as getting the important complex financial details correct. (Not everybody will understand the grittiest of the details, of course: that's inevitable. But everybody will be gripped by the book's narrative, all the same.) The Portfolio story on which this book is based was a great tale which was sometimes a bit fuzzy on the finance; the book is an even greater tale with the facts nailed down.

The result is that rarest of beasts in a world drowning in financial-crisis books: a new book which actually breaks news.

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There's lots more where that came from: this is an assiduously-reported and beautifully-written book. There aren't many reasons to be happy about the global financial crisis, but here's one: that it brought Michael Lewis back to his roots, to produce what is probably the single best piece of financial journalism ever written.

Felix adds much more to his review here. He's really an excellent resource of information. I'm not an economist and too many people on line act as if they are, but I'm doing my research and learning.

You can grab a copy here or any place else that you like. Michael Lewis sat down to discuss with Jon Stewart on The Daily Show last night, you can see the interview here:

Watch CBS News Videos Online

Props to CBS for this "60 Minutes" interview with "Liars Poker" author Michael Lewis about the Wall Street crash. Believe me when I say it's well worth reading the whole thing:

But none of that has changed the Wall Street bonus culture. Lewis says there is a sense of entitlement to outrageous compensation that he thinks is way out of proportion to its contribution to the U.S. economy.

"How did that happen that somebody thinks they're automatically worth millions of dollars a year?" Kroft asked.

"Well, when you're surrounded by a lot of other people who are being paid millions of dollars of year, you're not thinking, 'Oh, it's outrageous for someone to pay me millions of dollars a year.' You're thinking, 'It's outrageous that Jim got $500,000 more than me.' That they're looking to each other as reference points rather than to the larger society," Lewis explained.

Asked if he thinks people are worth that kind of money, Lewis asked, "What do you mean are they worth that kind of money?"

"Do they deserve all that money?" Kroft asked.

"Again, what do you mean do they deserve it? They worked really hard. They spent a lot of hours in the office," Lewis said. "So you can't begrudge someone who starts a company and employs lots of people and so on and so forth for making a lot of money. I don't mind people making a lot of money. On Wall Street the business has become very obviously divorced from productivity, from productive enterprise."

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