December 6, 2016

"The Big Short" author Michael Lewis was on CNBC's "Power Lunch" this afternoon. He was asked about the latest ruling in which the Supreme Court came down hard on insider trading. The Court ruled that even when the insider gave information to a family member and did not get any payment for the information, it's still an illegal act. Well, duh. And even the Court said "Well, duh" -- the decision was issued quickly and was 8-0. One can only hope that when President Trump provides insider information from the White House to his kids and they don't "pay" him for it, our government institutions come down just as firmly and unanimously. So what does Michael Lewis think of this decision?

MICHAEL LEWIS: This is a quixotic view but I always thought insider trading is a great distraction. When things go bad on Wall Street, the one thing that prosecutors know how to prosecute is insider trading. Look for insider trading. Very little to do with the problems that for example led to the financial crisis and led to the current mess in our political lives. I don't get to -- I don't get worked up about it in the first place, this doesn't interest me all that much.

TYLER MATHISEN, CNBC: Let's talk about a topic I think does interest you based on your work on "The Big Short" ...and that is the transparency or lack of it in the financial system. I was thinking back eight years ago, the economy was in a very, very different place, in the middle innings of what happened then in 2008 and 2009. Do you think the system has been shored up? A lot of talk about rolling back Dodd-Frank and so forth. Are we better off than we were eight years ago?

LEWIS: Better off in some ways. The banks are a lot less leveraged. That's a very, very, very big deal. I'm watching the incoming Trump administration, that's the thing that terrifies me is that they -- they're not going to -- they're going to reduce the capital requirements in banks. Because there will be pressure on them to do it. Already seemed to be interested in rolling back the Volcker rule. Which also makes me very uncomfortable, because essentially what you got is government-backed institutions being able to "roll the bones" in the marketplace. It -- it is, like, the things go well, traders keep the money, and if things go badly, it becomes a taxpayer's problem. And this, you know, this kind of weird socialism for elite Wall Street guys is what got us into the politics we have today. I am just -- I'm amazed watching what is going on with the Trump people that they have -- campaigned, very justifiably, saying that, you know, in a way the elites -- the elites had -- had -- the economy was rigged. Two systems. On guys on Wall Street, one for the rich and one for everybody else and he was going to come and fix this. He seems instead to be trying to restore the inequities that existed before the financial crisis.

MATHISEN: Why do you say that?

LEWIS: The talk about rolling back the Dodd-Frank provisions and the talk about weakening the Volcker rule. It is hard to know. Predicting what he's going to do I know is a stupid thing. Like predicting where the stock market will be tomorrow. You're watching, I think, something with a large random component there. This is not -- I don't think this is like some well thought out strategy. It is like, you never know what he's going to do next. If you try to tell a story about it, that predicts where he's going to go, I think you end up looking like a fool. So I wasn't... so I won't do that. Too much regulation on banks, and one of the problems -- one of the "problem" regulations they have identified is a prohibition on proprietary trading. I don't really see why institutions that benefit from deposit insurance should be allowed to speculate in the marketplace.


Modest (and crazy, I know) suggestion: maybe Congress should be held accountable for how many bank lobbyist dollars find their way into the political system.


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