Michael Lewis Discusses Bank Bailout, Slams Ratings Agencies On Rachel Maddow Show (VIDEO)

Michael Lewis, author of "Liar's Poker," the fabled book about Wall Street in the '80s, appeared on "The Rachel Maddow Show" tonight to promote his latest book about becoming a father, titled "Home Game." However, the conversation quickly turned to the current situation in the financial industry, and Lewis pointed out some of the paradoxes inherent in the way the current bank bailouts has been handled.

Lewis explained that the problem with the current system of bailouts is that, by not having the creditors take major hits and not actually nationalizing these companies, a situation has been set up where you have to flood the banks with public money in order for them to get back up and running and turn a profit. But these profits are "contrived," and whatever new regulation is imposed on the banking industry is going to reduce these profits, leaving the companies in the hole again:

For example, if they actually impose the sort of leverage requirements that a commercial bank is supposed to have on what were the investment banks, it's gonna be harder for them to earn their way out of this.

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Lewis also marveled at the political power that Wall Street continues to wield and reserved his harshest words for the ratings agencies:

The ratings agencies are culprit number one in all this. They put their seal of approval, they credit-rated all these piles of subprime mortgage bonds Triple-A, and thereby allowing people who could only buy Triple-A rated securities to buy these things, and thereby helping to create more of these things. Without the ratings agencies doing what they did, there's no way this financial crisis would have happened in the way it happened. It would be a much more muted event. And the problem is the investment banks pay the ratings agencies... That conflict, which is essentially federally sanctioned, doesn't seem to be addressed at all.

He and Maddow ultimately agreed that radical, structural change is necessary. Watch the interview below:

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Comments

[PhilipTaylor]

This guy is BRIGHT and willing to tell the truth against the M0B Rule on Wall Street!

OLIGARCHY Must END along with the FED!

We do NOT need what FDR either did as he left the Oligarchy in Power!

We must De-Link the Financial EL1TES from Congress and our Representatives!

We need TRUE Democracy NOT the FED Oligarchy with Congress Votes purchased by the RICHEST!

[PhilipTaylor]

The EL1TES buy Congress and the Ratings Agencies and we all LOSE, only the EL1TES WIN!

Campaign Reform so Good People in Congress can STAY GOOD PEOPLE IN CONGRESS!

The real FIGHT is for CAMPAIGN REFORM to de-link corporations from our government and remove the Oligarchy!

An Oligarchy is a form of government where power and control effectively rests with a small elite segment of society distinguished by wealth, military, or other power base.

President Andrew Jackson - Strong enough to beat the BANKING ELITES and live to 78!

__________­__________­__________­______

TIME TO REFORM CORRUPTION IN CAMPAIGN FUNDING SYSTEM

Simple Solution to PROTECT OUR Congress Members Votes so votes are NOT sold to Highest Bidders:

1. Setup a Government Contribution Acceptance and Funds Distribution Agency
2. Funnel all Political Contributions through this agency
3. Uses strict formulas for allocating funds to House+Senate Members
4. "Blindly" distribute lump sums twice per year to Politicians - No KNOWN SOURCES of funds!
5. Reserve part of funds for those New Candidates that meet campaign funding criteria
6. Two Term Limits for Senators
7. Four Term Limits for House Members

[nomorefed]

Take back the trillions of $$$ given to the banks, who just sit on it and make it totally ineffective then start government incentive to create realistic industries that give employment and generate real productive income, some of which would hopefully be from exports.

Every other country, especially China and most of Europe have goverment incentives to protect it's industries. No matter what you call it it's a form of protectionism and its inevitable. We should stop being naive and take care of our own house. The only ones who win if we don't are the multinational corporations who don't care where they get their hand out.

recommended reading: http://www.bit.ly/12NCJR

Every other country, especially China and most of Europe have goverment incentives to protect it's industries. No matter what you call it it's a form of protectionism and its inevitable. We should stop being naive and take care of our own house. The only ones who win if we don't are the multinational corporations who don't care where they get their hand out.

[watchTVgetSTUPID]

Business as usual. Apparently Obama was reading a script written by Geithner and Summers. The lie that Summers inserted was the laws put in place during the Great Depression could not protect the economy from the modernized banking system. The truth is Summers was the one who actively pushed to eliminate FDR's Glass Stiegal Act that did protect us for decades.

Now they are trying to eliminate the Savings and Loan Associations. Why? Because they are very solevant and have their own Deposit Insurance Funds. Geithner is afraid when Banks continue to fail and the FDIC runs out of money later this year, depositors will transfer their accounts to S&Ls and Credit Unions.

Obama is trying to cut off all escape routes the working people have to protect their money from the coming Wall Street financial panic.

[americaforme]

Recovery only works if:...You stop doing the same thing, in the same old way. Trust us on mainstreet, we are patriotic, we do put country first.

[thnk4selfagain]

Michael Lewis is indeed a sepctacular writer as Rachel says. His "Liar's Poker" is a classic. Lewis gets into a deeper discussion on what went wrong on Zakaria's GPS a few weeks ago. It's ri-vet-ing:

http://www.cnn.com/video/#/video/us/2009/06/07/gps.michael.lewis.int.cnn?iref=videosearch

[mjtaylor22]

THAT WAS A GREAT BOOK I READ IT A WHILE AGO

[jerichoj8]

they didn't just rate the bonds; they helped the banks structure them.

[nellyb stl]

We (Democrats and Republicans) elected Obama because we were tired and afraid of where America was going but the financial crisis has taught us how engrained in Capitalism is our system of Democracy -- which is truly based on the socialistic idea that ALL pay for a FEW. The Insurance Industry works on this presumption; and obviously now we know the financial system does also. Americans should never let Congress and the media forget that they lost $5 billion, thats Billion, in their 401ks and pensions plans with the gambling the rating agencies, Wall Street, and the Banks were doing with our money.

[MinasTirith]

In fact, we no longer truly act in the name of 'Democracy'... We merely use it as a shield to hide behind and justify our wars or other more covert actions in other sovereign nations. These wars and actions are done in the name of Capitalism... When nations begin looking too 'Nationalistic' in their tendencies, we 'intercede'... so we can 'help' them... (Read: Help ourselves to their businesses once we convince them to de-nationalize them... all in the name of 'Democracy' of course).

In Iraq... after we invaded them... Spontaneous elections sprouted up... BUT, they were electing officials who believed in nationalizing resources... We could not have this! So, we halted those elections, declared them null and void, and restructured how they worked so we could get the people 'Elected' who saw the economy as Capitalistic.

Yea, that's Democracy for you.

[PhilipTaylor]

Crony Corporatism and Oligarchy perfectly matches what you describe!

An Oligarchy is a form of government where power and control effectively rests with a small elite segment of society distinguished by wealth, military, or other power base.

We need TRUE Capitalism and True Democracy. Not the FAKE one we have been living!

Insuluding "FAIR Markets" and representatives of the PEOPLE, Not the EL1TES!

[Pero]

Correct on the rating agencies - and still NOBODY from them or SEC prison terms yet. White collar crimes pay well

[platanoman]

Interesting convo, but aren't most of the corporations that took bailouts converted commercial banks? And some of the huge failed investment banks like Merrill Lynch, Bear Stearns, etc were bought out by huge banks.

[westreal]

I learned something new again. Rachel has the best off the road guests with diverse insights into what's going on. They're not like all the pundits I see on other shows just saying the same thing over and over again. Kudos to Maddow for going the extra mile.

[RabidRightRebel]

There is really only one major reform that is needed and that is returning of the usury interest rate laws. If lenders are not allowed to charge consumers more than say 5% above T-bill rates for mortgages and 10% above T-bill rates for all other forms of credit it would force them to be more responsible with their loans and we would all be better off.

The irresponsible lending practices that got us into this mess were based on the illusion that all risk can be quantified and covered by higher interest rates. The fallacy of this logic is that risk is linear and not logarithmic. After a certain point the interest rate that needs to be charged to cover the risk creates so much more default risk that it counterproductive.

[vagabondvet]

All risk *can* be quantified to a certain extent, if only estimated. Limits on interest rates will only cause credit to dry up further, because lenders won't lend to risky borrowers if they have no profit incentive.

[schatsie]

If Obama was serious about helping the working class out, he would have overturned the Bush tax cuts for the rich and called them the Wall Street Bailout Surtax....

If he was serious about helping the bottom 60% of us who have absolutely crappy healthcare, he would have started auditing businesses and disallowing the business expenses for gambling in Las Vegas and golfing etc,,,instead us taxpayers are picking up the avoided tax funding.... We are now Connecticut Yankees living in King Arthurs Court where only the little people pay taxes....

[denny8844]

Actually according to the IRS the lowest 50% of tax returns paid 3% of the individual income taxes. The top 10% of tax returns pay 71% of all individual income taxes. I would not say that the "little people" are the only ones paying taxes. Lets stick to the facts and then base our public policy on those facts.

[ldsb]

The problem with your stats is you fail to note what percentage of income goes to the top 10% vs. bottom 50 %- my guess is that well over 71% of income earned goes to the top 10%. So if the top 10% earns 90% of income earned, it follows they should pay 90% of income taxes paid. Anyone know how to check this out?

[Hedgehogging]

LOL! Is this an interview or a day time drama? Could that "interview" be anymore scripted?

American politics have turned into a TV/movie set.

Disgusting!!!

(I'm obviously not talking about the fly interrupting.)

[MSaxe]

It's the rating agencies AND those that paid for their services!

[schatsie]

Temptation works and works and works,,,,,first story in the Bible....

My temptation was realized when 7 years after I left the company where I identified 2 million dollars in overpayments, I woke up and realized I could have had the money sent to the Cayman Islands..... No bonus, no nothing for the overpayments, heck maybe they did go to the Cayman Islands only in someone elses account.....So much for fiduciary responsibility....

[Carolab]

Where's the Anger as the Wheels Come Off Obama's and the Democrats' Recovery Program?

by Dave Lindorff
Originally published on Wednesday, 10 June 2009

So far, most Americans remain unaware of the scale of this crisis.

While the Obama administration and the Treasury and the Fed are bulldozing funds into the coffers of the big banks, allegedly to get them to lend, the banks, from the largest to the smallest, are pulling back, afraid that borrowers will end up going bust on them--and with good reason, given the high and rising level of unemployment So much for economic stimulus efforts.

Not that borrowers have been lining up to get credit. Rather, most people, if they aren’t simply going bankrupt or letting collection agents harass them for nonpayment, are trying to pay off credit card balances, and to cut expenses. With official unemployment approaching 10%--a level it may hit this month—and real unemployment, as measured the way it used to be back in 1980, at closer to 20 percent, the majority of Americans not only have friends and family members who are unemployed or working part-time or at odd jobs involuntarily, but are worried about getting the axe themselves.

Meanwhile, the short-lived but incredibly expensive Obama rescue program, like a stagecoach at the end of a spaghetti western chase scene, is about to have the wheels fall off and go sliding over a cliff.

http://baltimorechronicle.com/2009/061309Lindorff.shtml

[JacksonJones]

With the stimulus package only 4 mos. old, the pronouncement that the wheels have come off of the plan is so premature as to come across as, well, something that no one who actually knows anything about economics who didn't have an axe to grind would say, in other words, ignorant at best, dishonest at worst.

[Carolab]

The American Empire Is Bankrupt

This week marks the end of the dollar’s reign as the world’s reserve currency. It marks the start of a terrible period of economic and political decline in the United States. And it signals the last gasp of the American imperium. That’s over. It is not coming back. And what is to come will be very, very painful.

Barack Obama, and the criminal class on Wall Street, aided by a corporate media that continues to peddle fatuous gossip and trash talk as news while we endure the greatest economic crisis in our history, may have fooled us, but the rest of the world knows we are bankrupt. And these nations are damned if they are going to continue to prop up an inflated dollar and sustain the massive federal budget deficits, swollen to over $2 trillion, which fund America’s imperial expansion in Eurasia and our system of casino capitalism. They have us by the throat. They are about to squeeze.

http://www.commondreams.org/view/2009/06/15-0