Michael Lewis- Financial Disaster Tourist

Former Salomon Brothers bond trader Michael Lewis has morphed into the country’s most talented financial writer, someone with a remarkable gift for making complex financial issues simple to understand.  His new book Boomerang, a collection of recent essays for Vanity Fair, is an up close and personal look at the places that got the drunkest in our most recent credit fueled bender- Iceland, Greece, Ireland, and … California.  These places, and their bankers, were the folks responsible for our present, durable financial crisis.

You meet a remarkable cast of characters- an Icelandic cod fisherman who morphed, with a few days of training, into an expert in currency hedging and then dealmaking, the abbot of an obscure Greek Orthodox monastery who swapped the Greek government a worthless lake in exchange for billions of dollars in commercial real estate, a bankrupt Irish property developer who drove an cement mixer onto the grounds of the Irish Parliament and disabled it, and the financial advisor to Vallejo, California, a bankrupt city in the San Francisco Bay area.  Boomerang is written in pitiless, plain English, and by the time you’ve finished it, you’ll understand not only how deep the hole is into which we’ve all fallen, but why we got there. 

America Held Hostage, Part II

In this Sunday’s New York Times, Matt Bai had a brilliant essay contrasting the partisan shootout in Washington with successful legislative terms in New York and New Jersey, where, despite sharp partisan differences, Governors and legislators moved together toward reform. http://www.nytimes.com/2011/07/10/sunday-review/10governors.html?pagewanted=all

Bai nailed the situation in Washington.  In his view, the last three elections have been misinterpreted by the leadership of the winning Congressional party as an ideological mandate (2006 and 2008 for restoring liberal activism and 2010 for restoring limited government).  To Bai, the elections weren’t ideological statements by voters, but rather outpourings of disgust over partisan gridlock, corruption and hypocrisy.  What voters were saying was, “clean up the mess and get our house in order”.  We couldn’t be further away from doing that in Washington right now. 

At the very time European financial markets are melting down, America is not asserting desperately needed economic leadership.  Rather, its “leaders” are dancing on the edge of a cliff, with each Congressional party daring the other to take the blame for destroying our credit, the value of our currency and our legitimacy as the leading economy on the world.   It’s an embarrassing spectacle, and one with the potential to send us right back into the financial abyss we crawled out of less than three years ago, lucky far more than wise.    Three tumultuous elections don’t seem to have affected a deeply toxic Washington political culture.  What do we have to do to get them to work together to solve our common problems?