Exclusive - Michael Lewis Extended Interview Pt. 3

  • Aired:  04/01/14
  •  | Views: 64,170

In this exclusive, extended interview, author Michael Lewis explains why Wall Street needs to shrink. (7:46)

>> Jon: ALL RIGHT SO HERE WE GO.

HERE IS THE PART THAT I DON'TUNDERSTAND.

SO THESE TRADERS, THIS CANADIANFELLA AND OTHER GUYS THAT COME

TO THIS CONCLUSION AT THE SAMETIME.

THEY FIND EACH OTHER AND FORMTHIS GROUP THAT DECIDES TO NOT

BE SOCIALISTS OR COMMUNISTS ORREDISTRIBUTE WEALTH OR CAUSE A

REVOLUTION BUT TO TRY A CLEANERVERSION OF CAPITALISM THAT IS

A FAIRER VERSION.

WHY IS IT THAT THE 24-HOURFINANCIAL NEWS NETWORKS CANNOT

HAVE THAT SAME TENACITY OFSPIRIT AND INTEGRITY OF PURPOSE?

I DO NOT UNDERSTAND WHY THEY AREDEFENDING CLEARLY UNUSUAL AND

UNSAVORY DARK POOL BUSINESSPRACTICES?

>> YOU WATCH A LOT MORE OF THEMTHAN I DO.

>> Jon: I WATCH A LOT OF IT.

>> YES YOU DO. SO, YOU GET ALITTLE MORE WORKED UP.

JUST TURN IT OFF.

>> Jon: OK SO THERE'S A BUTTON.>> THERE'S A BUTTON.

SO WHY?

WHY WOULD THAT BE?

CAN BE SPECULATE.

>> Jon: SPECULATE!

>> SO WHO IS PAYING FOR THE ADSON THE -- WHO ARE THEIR GUESTS?

WHO IS THE SOCIAL -- THE WHOLESOCIAL WORLD IS --

>> Jon: THERE'S NO ROOM FORTHE MUCK RAKING?

>> NO NOT REALLY.

THE PROBLEM IS -- I THINK THEBIGGER PROBLEM IS WALL STREET

NEEDS TO SHRINK A LOT.

THE TECHNOLOGY HAS -- HAS SORTOF ELIMINATED THE NEED FOR A LOT

OF WHAT WALL STREET DOES.

YOU DON'T NEED HUMAN BEINGS TOBRING BUYERS AND SELLERS

TOGETHER FOR STOCK. EVERYONECAN PUSH THE BUTTON AND WE ALL

GO IN THE SAME BLACK BOX ANDTRADE. WE SHOULD ALL BE IN THE

SAME PLACE. WE SHOULDN'T BE AT13 DIFFERENT PUBLIC EXCHANGES

AND 40 DIFFERENT DARK POOLSAND ALL THE REST.

THAT'S A ROLE THAT WALL STREETUSED TO MAKE A LOT OF MONEY

PLAYING.

NOW THEY DON'T PLAYIT. SO THEY'VE CREATED THIS

ARTIFICIAL ROLE FOR THEMSELVESTO GENERATE THE FUNDS.

BUT IT'S PAINFUL FORINDUSTRY TO SHRINK.

IT'S ESPECIALLY DIFFICULT TO DOIT WHEN THE GOVERNMENT HAS BEEN

PROPPING IT UP FOR LAST FIVEYEARS, RIGHT?

I THINK -- I DON'T KNOW THEFEELING ON WALL STREET, THINK

IS A FEAR OF STUFF BEINGTAKEN AWAY.

THE FINANCIAL NEWS TELEVISIONSHOWS THAT ARE AROUND WALL

STREET ARE ONE WAY OR ANOTHERKIND OF OWNED BY WALL STREET.

THERE'S A LIMIT TO HOW RADICALYOU CAN BE.

BUT THE CRAZY THING IS YOURPOINT IS WELL TAKEN. THIS ISN'T

OCCUPY WALL STREET.

THIS IS A MARKET -- IT'S ANACT OF ENTREPRENEURSHIP.

THE SORT OF THING THAT HAPPENSIN SILICON VALLEY EVERY DAY.

SOMETHING NEW COMES IN THAT ISBETTER AND FAIRER, IT'S MORE

HONEST AND PEOPLE WANT IT ANDTHE OLD BUSINESS GOES AND DIES.

>> Jon: ULTIMATELY THE VALUEOF IT IS RUINED BY THE

DISSIPATION OF THE

INTEGRITY OF IT.IF YOU REINSTATE THE INTEGRITY

OF IT SO THAT INVESTORS DOFEEL THEY ARE NOT ENTERING

A CASINO THAT SOMEBODY HAS TAKENHALF THE PROFITS OUT

THE DOOR. I SAW ONE GUY ONCNBC -- SO THESE GUYS COME IN

THESE HIGH FREQUENT TRADERSTHEY CLIP A PENNY HERE AND A

PENNY THERE OFF OF EACH END OFTHE TRADE AND NOBODY GETS HURT?

>> YEAH, THAT'S NOT -- SO LET'SSAY THERE THE SKIM OR THE SCALP

IS $20 BILLION.

WHATEVER IT IS. THERE'S THAT

THE TRUST IS A MUCH BIGGERISSUE.

>> Jon: RIGHT.

>> THIS INSTABILITY IN THESYSTEM WHERE THERE ARE FLASH

CRASHES BECAUSE THE TECHNOLOGYIS RIGGED.

IT'S DESIGNED NOT FOR STABILITYBUT TO ENABLE HIGH FREQUENCYTRADERS TO MAKE MONEY.

>> Jon: RIGHT.

>> BUT THE PRICE OF THE MISTRUSTIS HUGE BECAUSE IT MEANS THAT

THE COMPANIES THAT ACTUALLY NEEDCAPITAL PAY MUCH MORE FOR ITBECAUSE

INVESTORS ARE WARY.

THE PRICE OF THAT IS VERY HARDTO MEASURE.

YOU WOULD THINK THAT SOMEONEWOULD TWIG TO THAT.

>> Jon: IS THE COMPLEXITY OFTHE SYSTEM WHAT KEEPS IT ABLE TO

METASTASIZE THE WAY IT HAS?

>> YEAH.

>> Jon: IT TOOK THESE REALLYBRIGHT GUYS A REALLY LONG TIME

TO DECONSTRUCT THE SYSTEM.

AND THE WAY THAT THEY DO IT ISFASCINATING IN AND OF ITSELF.

THE GUY THAT COMES IN ANDDESIGNS IT THROUGH PICTURES SO

YOU CAN SEE, VISUALIZING WHERETHE TRADES ARE GOING, WHAT IS

HAPPENING IS INCREDIBLE.

>> THIS IS A REPRISAL OF THEFINANCIAL CRISIS.

THE SUBPRIME MORTGAGE MARKET.WHAT HAPPENED THERE IS

A LOT OF BAD LOANS WERE MADEBECAUSE THEY WERE DISGUISED WITH

REALLY COMPLICATED WALL STREETCREATIONS CALLED COLLATERALIZED

DEBT OBLIGATIONS.

>> Jon: RIGHT.

>> THIS IS PART TWO.

IT'S A MARKET MADE -- SEEMINGLYTRANSPARENT.

YOU CAN GO FIND OUT EVERYTHINGSORT OF, IF YOU DIG A LOT, AND

YOU ARE A DETECTIVE AND HAVETEAMS OF PEOPLE TO DO IT BUT

IT'S ACTUALLY OPAQUE BECAUSEIT'S SO COMPLICATED. SO THE

COMPLEXITY IS A TOOL, IT'SESSENTIALLY A TOOL FOR CREATING

A SITUATION WHERE SOMEONE ONWALL STREET KNOWS SOMETHING

YOU DON'T SO THEY CANTAKE ADVANTAGE OF YOU.

I THINK IT IS THE RESPONSEOF A SICK SYSTEM.

NOT SICK, COOL.

[ LAUGHTER ]SICK --

>> Jon: THAT IS SOMEONE WITHKIDS.

I'M GONNA TELL YOU THIS SYSTEMIS FAT, YO!

I MEAN FAT, SERIOUSLY, IT'SMORBIDLY OBESE.

[ LAUGHTER ]BUT WHAT IS INCREDIBLE TO ME IS

THAT THE LACK OF AGILITY IN THEREGULATORS IS AGAIN ONE

OF THE BIGGEST ISSUES. THERE ISCOMMON SENSE IN ALL THIS.

I BELIEVE THERE ARE REALLY GOODACTORS ON WALL STREET.

EVEN NOW GOLDMAN IS SWITCHINGAND FLIPPING TO THIS IEX.

THERE ARE GOOD ACTORS WHOWILL WORK WITH WHAT THEY

THOUGHT WERE AGILE ENOUGH ANDSMART ENOUGH REGULATORY

TEAMS, SEAL TEAM 6'S OFREGULATION THAT WOULD

NOT BURDEN THEM. BECAUSE THETRUTH IS THESE LARGER

FIRMS DINE OFF OF HEAVYREGULATION BECAUSE THEY ARE THE

ONLY ONES THAT CANKEEP UP WITH IT.

THEY HAVE HUGE LAW TEAMS THATPOUR THROUGH IT.

>> ALL TRUE.

>> Jon: THE YOUNG START-UPS THEYWEED OUT A TREMENDOUS AMOUNT OF

COMPETITION FROM THEIR PRODUCTSBY KEEPING REGULATIONS

BURDENSOME BECAUSE YOUNGCOMPANIES CAN'T COMPETE.

>> TRUE.

THE PROBLEM IS -- I THINKTHAT -- LOOK, IT'S VERY HARD TO

REGULATE AN INDUSTRY IN WHICHTHE PEOPLE ARE PAID SO MUCH MORE

THAN THE REGULATORS.

IF YOU ARE SITTING AT THE S.E.C.

AND YOU ARE A YOUNG PERSON YOUARE NOT THINKING I WANT TO GROW

UP AND BECOME BOSS OF THE S.E.C.

YOU ARE THINKING I WANT A JOB ATGOLDMAN SACHS. I WANT A JOB

AT A HIGH FREQUENCY TRADINGFIRM. ONE OF THE FIRST THINGS

WHEN BRAD KATSUYAMA, THE HERO OFSTORY FIGURES OUT THE MARKET IS

RIGGED AND HE'S GOING TOTELL AMERICAN INVESTORS

ABOUT IT THE PEOPLE IN CANADASAY WE SHOULD LET THE

AMERICAN GOVERNMENT KNOW ABOUTTHIS BEFORE WE GO AND DO THIS

BECAUSE WE DON'T WANT TO UPSETTHE AMERICAN GOVERNMENT.

SO HE GOES TO THE S.E.C. ANDEXPLAINS WHAT HE FOUND AND THEY

ARE LIKE SO WHAT?

HALF OF THEM ARE WORRIED ABOUTIT AND HALF OF THEM THINK, WHY

CHANGE THAT?

IT'S JUST GUYS BEING SMART ONWALL STREET KIND OF THING.

HE GOES BACK TO HIS OFFICE ANDTHE BANK COMMISSIONS A STUDY TO

FIGURE OUT HOW MANY PEOPLE FROMTHE S.E.C. HAVE GONE TO WORK AT

HIGH FREQUENCY TRADING FIRMS THEPREVIOUS LIKE THREE YEARS IT WAS

200 AND SOMETHING S.E.C.STAFFERS HAD GONE TO HIGH

FREQUENCY TRADING FIRMS ORLOBBYISTS WORKING FOR HIGH

FREQUENCY TRADING FIRMS.I MEAN IN THAT SITUATIONI MEAN REALLY WHAT

IS GONG TO CHANGE. SO THEREASON THEY BUILT THE EXCHANGE

AND TRY TO DEAL WITH IT IN THEMARKETPLACE AS A BUSINESS IS

THEY'D GIVEN UP REGULATORSWE'LL FIX IT BY CREATING THIS

FAIR EXCHANGE AND WE DON'T NEEDTHE REGULATORS.

>> Jon: HAS THE TIDE TURNED?

>> I'LL TELL YOU IN A WEEK.

>> Jon: WILL YOU?

>> YEAH, I WILL.

>> Jon: PLEASE LET ME KNOWBECAUSE I'M ALWAYS INTERESTED IN

TIDES.

MAN, I REALLY DON'T KNOW HOW YOUDO IT.

YOU FIND THE STORIES RIGHT INFRONT OF EVERYBODY'S EYES.

AND HIGH FREQUENCY TRADING ISNOT A BRAND NEW, YOU KNOW ALONG

WITH THE DERIVATIVESTRADING THEY WERE NOT

BRAND NEW BUT YOU FOUND A WAY TOFOCUS ON IT IN A

VERY ACCESSIBLE MANNER ANDA VERY COMPELLING MANNER.

AND I APPRECIATE IT.

>> THANKS FOR HAVING ME ON.

>> Jon: FLASH POINT IS ON THEBOOKSHELVES NOW.

[CHEERS AND APPLAUSE]

Loading...