Michael Lewis, the author and journalist highly regarded for his ability to tease human drama out of seemingly mundane subjects, arrived in Leicester Square in London on Monday night. An expectant crowd had gathered to see the latest cinematic adaptation of one of his books. Following on from the 2011 film Moneyball, inspired by Lewis’s account of a Major League baseball team that used data and statistics to compete with far wealthier teams, The Big Short bears all the same hallmarks, combining analysis with a novelist’s flair for character. Lewis’s work is by turns creative and rigorous, befitting of a man who studied art history for his BA at Princeton and then completed an MA in economics at the LSE.
As the film retells the now familiar tale of bankers accruing riches while offering mortgages to people who cannot afford them, anger comes as a natural response. “You have compiled a collection of court-worthy evidence and yet nothing is going to change,” says the broadcaster Jon Snow during his conversation with Lewis after the screening.
Unpicking the workings of high finance is a job to which Lewis has devoted himself for almost 30 years. During a brief stint as a bond salesman, he angered his employers with an article for the Wall Street Journal that argued that investment bankers were overpaid.
“I got to work the next morning and the chairman of Salomon Brothers International was sitting at my desk. He said, ‘Do you know how much trouble we’re in – both of us?’”
Soon after that, Lewis quit his “tedious” job to write full-time. Today, he is the foremost chronicler of the period that transformed global finance from the relatively genteel pursuit it was considered to be before the 1980s, turning it into an industry that has become a byword for unaccountable greed and recklessness. As Lewis says of the traders who helped to provoke the crash of 2007-2008: “Some people lost almost $10bn for their firms and showed almost no remorse.”
The underlying problem, to which he constantly returns, is one of warped incentives. “There’s a deep behavioural problem in our financial culture,” he says. “The people on the wrong side of the bet got rich, too. What does that tell you? If you can make really stupid decisions and get rich, then you’ll keep on making stupid decisions.”
The 2008 collapse can also be seen as a failure of regulation – which Lewis again ascribes to poor incentives. “If the regulator makes one-tenth of the money made by the people they are regulating, they will never do the job properly,” he says. Many regulators aspire to work for the same companies. “They’re aware of where their interests lie.”
Most disturbing to Lewis is that the opportunism and skulduggery captured in The Big Short did not amount to anything illegal. “If you can break the economy without breaking the law, then we need new laws,” he says. Yet new legislation has not been forthcoming. “The response has been totally inadequate.”
Still, Lewis believes that the prospects for reform are “not as hopeless” as Snow suggests. “This is going to sound preposterous but there are pockets of idealism, even in the financial sector . . . There are people who want to change – they just need help,” he says.
Lewis won’t write about Wall Street again, he says, preferring to focus on other subjects. Snow wonders if he will take his talent for narrative and financial expertise into activism or politics. No one seems better qualified to advocate for greater regulation in banking. “It has occurred to me that my next move could be to organise a march,” he says. “We’ve reached that point.”
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This article appears in the 13 Jan 2016 issue of the New Statesman, David Bowie