Liar’s Poker — Worth Re-Reading

Can this book really be 20 years old?

I found a copy while visiting and have read it again — still as hilarious as I remember, but in hindsight it seems even more on target.

Visiting a Geneva money manager who handled a mere $86 million, he was told the manager had dealt with 285 different investment banks in the last year.

“And they are all the same,” said the manager.  So much for the importance of keeping the too-big-to-fail global institutions intact.

“In other words, the whole idea of globalization was a canard. The brave new world of advanced communications and a single worldwide market for capital did not necessarily imply that a small handful of investment banks such as Salomon would dominate the world. It meant that money bounced more freely around the globe. But there didn’t seem to be the same economies of scale in handling that money as in, say, frozen green beans.”

And this was, as I noted, 20 years ago.

Lewis also has the launch of mortgage-backed securities. government guarantees — Ginnie Mae before Freddie and Fannie — and an S&L bailout that allowed the home lenders to deduct current losses against taxes paid in the previous 10 years.

It’s kinda like the $33 billion tax break that US homebuilders recently received from Congress, as reported by Gretchen Morgenson.

“On Nov. 6, President Obama signed the Worker, Homeownership and Business Assistance Act of 2009 into law, extending unemployment benefits by 20 weeks and renewing the first-time homebuyer tax credit until next April.

“But tucked inside the law was another prize: a tax break that lets big companies offset losses incurred in 2008 and 2009 against profits booked as far back as 2004. The tax cuts will generate corporate refunds or relief worth about $33 billion, according to an administration estimate.”

She added:

“Before the bill became law, the so-called look-back on losses was limited to small businesses and could be used to counterbalance just two years of profits. Now the profit offset goes back five years, and the law allows big companies to take advantage of it, too.”

Good value for lobbying dollars. Major homebuilders spent $200,000 or so each on lobbying for the tax change and expect to make $200 million to $450 million. from the change in law.

It is always a delight to watch the free market in action. More details in Liar’s Poker about how far back this goes in the mortgage business.

About Tom Groenfeldt

I write - mostly about finance and technology, sometimes about art, occasionally about politics and the intersection of politics and economics. My work appears on and and occasionally in The American Banker and Banking Technology in London.
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