Wednesday, February 02, 2011

Michael Lewis on the financial crashes in Ireland, Greece and Iceland

Former bond trader, Michael Lewis, author of "Liar’s Poker," "The Big Short" and "The Blind Side," has written for Vanity Fair on the financial crises in Greece and Iceland. In the March issue, he turns his attention to Ireland.

“The Irish became obsessed with their own property market,” he says. “The Icelandic tycoons got obsessed with conquering the world outside of Iceland.”

Lewis said he found it “amazing” that the Irish government has “socialized” the banks—some $80bn in senior and subordinated debt—and made it the financial responsibility of Irish taxpayers, who didn’t create it.

During that period, Lewis said, Merrill Lynch received hefty fees to underwrite bonds by some Irish banks. When a Merrill Lynch employee in London characterized some Irish bankers as “irresponsible,” said Lewis, the firm fired him.

Quoting one of his interview subjects in the Vanity Fair article, Lewis said, “The problem with the Irish, you push them, you push them, and they take it, and one day they go wacko on you.”

When Irish eyes are crying

First Iceland. Then Greece. Now Ireland, which headed for bankruptcy with its own mysterious logic. In 2000, suddenly among the richest people in Europe, the Irish decided to buy their country–from one another. After which their banks and government really screwed them. So where’s the rage?

Beware of Greeks Bearing Bonds

As Wall Street hangs on the question “Will Greece default?,” the author heads for riot-stricken Athens, and for the mysterious Vatopaidi monastery, which brought down the last government, laying bare the country’s economic insanity. But beyond a $1.2 trillion debt (roughly a quarter-million dollars for each working adult), there is a more frightening deficit. After systematically looting their own treasury, in a breathtaking binge of tax evasion, bribery, and creative accounting spurred on by Goldman Sachs, Greeks are sure of one thing: they can’t trust their fellow Greeks.

Wall Street on the Tundra

Iceland’s de facto bankruptcy—its currency (the krona) is kaput, its debt is 850 percent of GDP, its people are hoarding food and cash and blowing up their new Range Rovers for the insurance— resulted from a stunning collective madness. What led a tiny fishing nation, population 300,000, to decide, around 2003, to re-invent itself as a global financial power? In Reykjav√≠k, where men are men, and the women seem to have completely given up on them, the author follows the peculiarly Icelandic logic behind the meltdown.

Q&A: Michael Lewis and the Irish Politicians That Sank Ireland