Liar’s Poker by Michael Lewis

About 10 years ago, I was living in California and decided to pay someone from an investment bank to provide advice on where to invest my hard earned savings. I figured the investment bank had been around for a long time and since it was making money, I would too. Oh, if only I had read Michael Lewis's book Liar's Poker before signing on the dotted line. Not only would I have had a pleasurable read, I would have made a different decision.

Liar's Poker tells of the rise and fall of Salomon Brothers during the 1980's from the view point of an insider: Lewis' worked as a bond trader in London for Salomon Brothers. The world he describes is one where it is far better the client loses money than Salomon Brothers lose money, where white men rule supreme and where money counts for everything. It's a world filled with characters all the more interesting because they are real people. And some of what these people did was amazingly creative and bold.

Lewis does an excellent job of explaining complicated financial manoeuvres using simple terms. He explains how homeowner mortgages were turned into mortgage bonds and tells of the invention of junk bonds in a way that is easily understood, even by those of us who don't work in the financial world. He provides background on some of the legislative changes to banking and investment rules that led to opportunities for the wizards at Salomon Brothers to create new financial products like mortgage backed securities.

The amount of money earned by those working in this world is staggering. To learn that bonuses were calculated on revenues generated for Solomon Brothers answered a lot of questions for me: investment banks could have lots of revenue while at the same time, their individual clients lost money.

"The trader pretended to shuffle through some complicated looking sheets…This, [Lewis] learned, was standard practice when a customer was about to be sacrificed for the greater good of Solomon [Brothers]."

"Wall Street's take-over salesmen are not so different from Wall Street's bond salesmen. They spend far more time plotting strategy than they do wondering whether they should do the deals. They basically assume that anything that enables them to get rich must also be good for the world."

Liar's Poker is very funny at times and while I'm glad I don't work on Wall Street, I wouldn't mind meeting some of the people who do.

A Common Outlook recommended read.

This book review was written by Helen Latimer

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