This paper compares three journalistic accounts of the 2008 financial crisis — Michael Lewis's The Big Short, Andrew Ross Sorkin's Too Big to Fail, and David Wessel's In Fed We Trust — to examine how government indifference and a culture of unaccountability allowed the economic collapse to occur. Drawing on characters such as Steve Eisman and Vinny Daniel, the paper contrasts Lewis's human-interest storytelling with Wessel's restrained institutional narrative and Sorkin's detail-rich account of the crisis's final days. The central argument is that the crash resulted not from a fiscal failure but from a fundamental failure of accountability at every level of Wall Street, the Federal Reserve, and the White House.
Michael Lewis gives an excellent first impression of Wall Street in the 1980s with an outsider's introduction to the inside world of stocks, bonds, and debt reshuffling. Lewis's The Big Short is a follow-up to his Liar's Poker, which chronicled his three years with Salomon Brothers as a naive, twenty-four-year-old, inexperienced financial advisor who made a "preposterous" amount of money for telling others how to place their bets: "Wall Street's essential function was to allocate capital: to decide who should get it and who should not. Believe me when I tell you that I hadn't the first clue. I'd never taken an accounting course, never run a business, never even had savings of my own to manage" (Lewis xiii). Yet what happened that decade — and continued to happen for the next two — was every bit as "preposterous" as the salary Lewis was paid to do a job he had no idea how to perform.
Lewis, in short, provides the context for the world of financial banking, while Andrew Sorkin and David Wessel set the stage for readers to see the failure of the people in charge to regulate the machine that would ultimately crash in 2008. Using Sorkin's Too Big to Fail, Wessel's In Fed We Trust, and Lewis's The Big Short, this paper analyzes the government indifference that allowed the economic crash of 2008 to happen.
Lewis begins his big story by telling a small one about Meredith Whitney, whose exposé on Citigroup in 2007 began a series of Wall Street unravelings. Lewis contacted her to find out what kind of person had fired that shot so succinctly: she was no one special — a graduate of Brown University who earned a degree without having really learned anything. She credited whatever success she had to one man, her mentor at Oppenheimer and Co., Steve Eisman — another nobody by political standards — but a man who "helped her to establish not merely a career but a worldview" (xvii). That latter detail is significant, for it is what is most lacking in the financial world. A person's worldview defines his actions and who he is.
The worldview of Wall Street — and of the government that had been in its back pocket for thirty years — had begun and ended right there: with Wall Street. This is the evolution of self-interest. Such a worldview cannot sustain anything, and it finally let its philosophical adherents crash in 2008 — only to be bailed out, magically, by sheer whimsy and will. As David Wessel says, "In Fed we trust" — and therein lies the problem.
According to Wessel, however, the Fed is part of the solution: "The United States found itself at the edge of the abyss and was pulled back in large measure through the efforts of the Federal Reserve" (vii). It is a claim that sounds jarringly unoriginal and fairly incongruous with statements from journalists like Matt Taibbi and politicians like Ron Paul, who blast the Fed as an out-and-out criminal enterprise. Wessel references economic historian Brad DeLong, who offers this analysis: "It is either our curse or our blessing that we live in the Republic of the Central Banker" (4). For Wessel, the Federal Reserve is an amalgam of good and bad decisions — note the Greenspan era, when "the smart people of the Federal Reserve allowed the housing bubble to inflate" (4). Ben Bernanke, then Fed chairman, is, according to Wessel, doing his legitimate best to ease America back into a stable economy. The problem is that Wessel believes the Fed is necessary. People like Ron Paul see the Fed as part of the problem. The fact is that the country was in more of a shake-up than people like Wessel cared to realize. His treatise on two years of recovery is revealing, but it glosses over the larger issue: Wessel cannot see the forest for the trees.
Lewis, however, can. His Big Short picks up with the story of Eisman — the man Whitney so admired, and whose worldview leaves many quaking in anger. He does not beat around the bush or spare feelings; he sees the truth for what it is and delivers it plainly. For people who do not like to see the writing on the wall, Eisman is an unlikable fellow. For people who admire truth, Eisman is a master. The fact that a person like Eisman could exist at all on Wall Street says something about the nature of the financial behemoth. It is somewhat akin to the story of Macbeth — the Scottish warrior who made one bad decision after the next before finally losing his head. Eisman is like the little reminder that appears along the way, telling Macbeth he is not on the right track: it is called a conscience — and Macbeth ultimately squashes it out of himself.
Eisman, Lewis shows, had been the voice of conscience on Wall Street for some time, admitting to the unconscionable — whether to the head of "a large U.S. brokerage firm" or "the president of a large Japanese real estate firm" — that their own dealings failed to make any sense. In the world, there are two types of people: those who say yes and everything else you want to hear, and those who tell the truth. Eisman is emphatically the latter.
Vinny Daniel is another such figure. Hired by Arthur Andersen, his job as an accountant was to audit the big Wall Street firms. In theory, that is what his job was supposed to be. In reality, his job was to rubber-stamp and approve all that such firms set before him. There is regulation on Wall Street — it is just easily circumvented. People like Vinny Daniel are the ones who clog up the works:
"He concluded that there was effectively no way for an accountant assigned to audit a giant Wall Street firm to figure out whether it was making money or losing money. They were giant black boxes, whose hidden gears were in constant motion. Several months into the audit, Vinny's manager grew tired of his questions. 'He couldn't explain it to me. He said, "Vinny, it's not your job. I hired you to do XYZ, do XYZ and shut your mouth." I walked out of his office and said, "I gotta get out of here."'" (Lewis 11)
Enter Steve Eisman. Vinny's tip was all the proof Eisman needed to point out what he had been wanting to show for some time — that Wall Street was laying an egg with its subprime mortgages. The game was, essentially, no different from Charles Ponzi's back in the 1920s. Only now it was massively bigger — and global.
Eisman had at first thought the subprime mortgage bundles were good for the economy — they looked good, after all. He was also making Oppenheimer and Co. look good by criticizing other firms while leaving Oppenheimer relatively unscathed. Eisman's opinion mattered, even if some did not want to hear it. But the facts were getting too big to ignore: "Eisman wanted to write a report that more or less damned the entire industry, but he needed to be more careful than usual. 'You can be positive and wrong on the sell side,' says Vinny. 'But if you're negative and wrong, you get fired'" (Lewis 13).
With the help of Vinny's analysis, Eisman's report was negative and right. However, the manner in which it was released caused most of the trouble. Without giving any of the companies named prior notice, the analyst made his case in public: "Here is the difference," he said, "between the view of the world they are presenting to you and the actual numbers" (15). It was, again, a clash of worldviews: one was based in reality, the other was not. "He held a picture of the financial world in his head that was radically different from, and less flattering than, the financial world's self-portrait" (Lewis 16).
"Global financial collapse follows Ponzi-like implosion"
"Goldman Sachs benefits as Lehman Brothers collapses"
"Wessel's restrained narrative shields Fed from criticism"
The three books by Sorkin, Wessel, and Lewis offer three different looks inside the economic crash of 2008 — and each gives its own accounting. Lewis offers the best vision of what true accounting looks like: it looks like Eisman, a man who has his head on squarely. Wessel gives the best vision of what people who do not like Eisman want that accounting to look like: they want it to look as though Bernanke, Geithner, and Paulson knew what they were doing and were doing it the best way they knew how — for the good of America. The fact is they did what they did for the good of themselves, because that is their world vision: self-centric.
You’re 56% through this paper. Sign up to read the remaining 3 sections.
Sign Up Now — Instant Access Already a member? Log inAlways verify citation format against your institution’s current style guide requirements.