In the Beginning There Was "Liar's Poker" by Michael Lewis

• First read this excellent blog item:
  
  http://www.boingboing.net/2008/10/03/liars-poker-a-timely.html
  
  From the above:
• I've just read (finally!) Michael Lewis's Liar's Poker: Rising Through the Wreckage on Wall Street, the classic 1989 memoir of life at Salomon Brothers investment bank in the run-up to the Wall Street crash of 1987. Lewis was hired to trade mortgage bonds (yes, the mortgage bonds that precipitated the crash of 2008) fresh from the London School of Economics, dispatched to Salomon's legendary training program in NYC, then shipped back to London.
  Lewis was a gifted salesman who made millions for the firm, but he was also deeply skeptical of the whole enterprise. This is an unbeatable combination, as it situated him perfectly to critically examine the culture, economics and ethics of the overheated bubble as it expanded, expanded, and, finally burst.
  It doesn't hurt that Lewis is a fantastic writer with a particular talent for explaining the minutae of investment banking without making you want to gouge your own eyes out. Through vivid portraits of the movers and shakers on Wall Street, Lewis recounts the origin stories of junk-bonds, corporate raiding, mortgage bonds, the S&L crisis, and the founding of Fannie Mae and Freddy Mac (both founded at the behest of Salomon in order to backstop the mortgage bond market).
  It's been 20 years since this was published, but there's never been a better time to read it. The hairy-knuckled, hyper-competitive, pirahnoid Wall Street and City traders he describes here could be the same hedge fundies who're poised over the tub with razors at their wrists today. Liar's Poker: Rising Through the Wreckage on Wall Street
• I found the above blog after writing what follows:
  
  Exactly what animals exist on Wall Street? Main Street wants to know! And now, damnit!
  
  Without comment, one of my most-used categories on this blog is Michael Lewis's "Liar's Poker." You will see why I evoke this book so often (without explanation) and why this book is is a necessity when you read my dictated quotes from my copy of this pawed- and markered-over book.
  
  I got the book off the shelf after walking Tuesday and having my neighbor Frank, during a discussion of our mutual loss of net worth, say: "What is a derivative?" I used to buy up all copies of "Liar's Poker" just to remind me how quinticential it is, and Sissy works at Friends of the Library! with books aplenty! Then when we moved into our present house two blocks away I threw all copies out except the one. Nevertheless I am going to try to give Frank a clean book, not mine which is marked up for future references.
  
  Enjoy --
  
  
  
  [Dictated with Nuance; omitted material and spelling errors not necessarily indicated or corrected; playing around with the "outline" and "quote" icon on Blogspot and do not know how to "undo"]
  

• 
  

  "Never before have so many unskilled, 24-year-olds made so much
  money in so
  little time as we did this decade in New York and London."
  
  "It was
  sometime early in 1986, the first year of the decline of my
  firm, Salomon
  Brothers."
  
  "At Harvard in 1987, the course in the
  principles of
  economics had 40 sections and a thousand students; the
  enrollment had tripled in
  10 years. At Princeton, in my senior year, for
  the
  first time in the history of
  the school, economics became the single
  most
  popular area of concentration."
  
  "Economics was practical. It
  got people
  jobs."
  
  "Economics alowed
  investment banking
  recruiters to compare
  directly the academic records of
  recruits. The
  only inexplicable aspect of
  the process was that economic theory
  (which
  is, after all, what economics
  students were supposed to know) served
  almost no function in an investment
  bank."
  
  "Glass-Steagall was
  an act of
  the U.S. Congress, but it
  worked more like an act of God. It
  cleaved mankind in
  two. With it, in 1934,
  American lawmakers had
  stripped investment banking off
  from commercial
  banking. Investment
  bankers now underwrote securities, such as
  stocks and
  bonds. Investment
  bankers, like Citibank, took deposits and made
  loans. The
  act, in
  effect, created the investment banking profession, the single
  most
  important event in the history of the world, or so I was led to believe."
  
  "After Glass-Steagall most people became commercial bankers. A
  commercial banker was reputed to be just an ordinary American businessman
  with
  ordinary American ambitions. He lent a few hundred million dollars
  each
  day, to
  South American countries. But really, he meant no harm....
  He had a
  wife, a
  station wagon, 2.2 children, and a dog that brought him
  his slippers
  when he
  returned home from work at six."
  
  "The
  investment banker was
  a breed
  apart, a member of a master race of deal
  makers. He possessed fast,
  almost
  unimaginable talent and ambition. If
  he had a dog, it snarled. He had
  two little
  red sports cars yet wanted
  four. To get them he was, for a man in
  a suit,
  surprisingly willing to
  cause trouble."
  
  "Man for man,
  Solomon Brothers
  was, in 1985 the
  world’s most profitable corporation. Wall
  Street was hot. And
  we were
  Wall Street's most profitable firm."
  
  "Wall Street traffics in
  stocks
  and bonds. At the end of the 1970s,
  Salomon Brothers knew more about
  bonds than any firm on Wall Street: how to
  value them, how to trade
  them, and
  how to sell them.... The rest of Wall
  Street had been content
  to let Salomon
  Brothers be the best bond traders as
  the occupation was
  neither terribly
  profitable nor prestigious. What was
  profitable was
  raising capital (equity) for
  corporations. What was
  prestigious was
  knowing lots of corporate CEOs. Salmon
  was a social and
  financial
  outlier."
  
  "In part this is due to the absence
  from the
  bond
  market of the educated classes, which in turn reinforces the point
  about how
  unfashionable bonds once were. In 1968, the last time a degree
  count
  was
  taken at Salomon Brothers, thirteen of the 28 partners hadn't been
  to
  college, and one hadn't graduated from the eighth grade. John Gutfreund
  was, in
  this crowd, an intellectual; though he was rejected by Harvard,
  he
  did finally
  graduate (without distinction) from Oberlin."
  
  "The
  biggest myth about
  bond traders, and therefore the greatest
  misunderstanding
  about the
  unprecedented prosperity on Wall Street in
  the 1980s, are that
  they make their
  money by taking large risks. …Most
  traders act simply as
  toll takers. The source
  of their fortune has been
  nicely summarized by Kurt
  Vonnegut (who, oddly, was
  describing lawyers):
  "There is a magic moment,
  during which a man has
  surrendered a treasure,
  and during which the man who
  is about to receive it has
  not yet done so.
  An alert lawyer [read bond
  trader] will make that moment his
  own,
  possessing the treasure for a magic
  microsecond, taking a little of it,
  passing it on."
  
  "In other words,
  Salomon carved a tiny fraction
  out of
  each financial transaction. The
  Salomon salesman sells $50
  million worth of new
  IBM bonds to pension fund X.
  The Salomon trader,
  who provides a salesman with
  the bonds, takes for
  himself an eighth (of
  a percentage point), or $62,500. He
  may, if he wishes,
  take more. In the
  bond market, unlike in the stock market,
  commissions are
  not openly
  stated."
  
  
  Now the fun begins.
  [Doorbell; to be continued]