Liar’s poker

Liar’s Poker Looks At Wall Street

Liar’s poker is a semi autobiographical book written by Micheal Lewis. It was published by WW Norton and Company.  It was released in 1989 and played a big role in defining the Wall Street culture to America. The title of the book came from a barroom game played by Wall Street traders. The Salmon Brother’s mortgage department features heavily in the book. Specifically the CEO John Gutfreund and Head of mortgage department Lewis Ranieri.

A Twisting Narrative Structure

The narrative in the book is split into two parts. One narrative is an autobiographical account of the writer’s experience on Wall Street. Specifically his experiences after he was hired by the Salmon Brothers. Lewis analyses and picks apart the attitudes and methods of Wall Street traders and rather than efficient, responsible bankers, we are presented with the reality that the traders are immature and incompetent.

The second part is more a practical and literal history of Wall Street and how the Salmon Brothers firm developed the concept of the mortgage bond. These two narratives are interwoven to give the reader both an insiders and outsiders perspective on the world of Wall Street. Lewis started his education as an art history major but he wanted to move into finance to be able to make money. Through his social and family connections he manages to get into the Salmon Brothers training program. Lewis was immediately shocked by the immature and obnoxious behaviour he encountered with the rest of the trainees. He was disgusted by the culture of money and greed that they thrived upon. Lewis eventually resigned in 1988 to complete the book.

Liar’s Poker Deconstructs Mortgage Markets

The book looks at how deregulation of public markets resulted in traders on Wall Street taking advantage of other people’s ignorance and grew extremely wealthy. Deregulation by the government resulted in savings and loan associations selling mortgages as bonds. Soon a disconnect started growing between what traders were paid and what they believed they should be paid. This resulted in the Salomon brother having many of their traders scalped by companies offering higher salaries.

Lewis states in his book that, even though the company eventually started hiring graduates to work with them, when they started, some of the traders hadn’t even passed the eighth grade. He makes the case that the traders had financial success purely based on luck.

Lewis Ranieri was considered a visionary at the time for developing the mortgage department before a market existed for it and the government deregulation of the mortgage market simply was a lucky co incidence. Th3e staff that moved over to other companies for bigger salaries soon started costing those companies money due to their lack of any specific financial skills.

The Anti Climactic Tale Of Financial Stability

After more companies started trading on the mortgage market the prices soon stabilized and the success of Salomon brothers soon started looking like the flash in the pan it was. The book is a great read and how Lewis combined the two story threads makes the book simple to follow and refreshing.  Lewis’s autobiographical account makes the story personal and the historical sections provide a foundation for his story to take place.