Author Michael Lewis sat down with Slate’s Jacob Weisberg to talk about the topic he’s known so well for, the evolution of Wall Street.
He described the madness that started in the 80s, when suddenly 24 year-olds “who clearly knew nothing” making millions of dollars, and how the Street took on the misguided belief that all financial innovations were good.
The innovations he addressed specifically, are the ones that allow Wall Street firms to bet against their own clients. You see, to him, the changes in Wall Street’s business model comes down to one thing:
“These businesses that were once agency businesses… they worked for their clients — investment banking advice, what stock you should buy advice and that paid very well. The pay in that business declined and the way that banks made up for it was by gambling with their own money… Once they started gambling with their own money there was this huge conflict of interest.”
So Wall Street must decide. Are you an advisory business or a gambling business? “You can either be Charles Schwab or a hedge fund,” said Lewis.
Watch the full video below: