Michael Lewis, who authored “Moneyball,” “Liar’s Poker” and “The Blind Side” spoke to CNBC this morning about the two key themes that degraded our financial system over the past 30 years.
I agree with Lewis that the solutions are quite simple: financial firms must go back to choosing between being a dealer or being an advisor. We cannot afford them to be both. Cross-selling in this area is deadly for clients and the stability of the banking sector and we already learned this lesson in the 20’s and 30’s. The real economy is paying for our naivete on this point again today. Second, the firms that chose to be dealers and concerted risk takers must do so on their own dime. This means a migration back to the old model of partnerships where those making the bets can reap the rewards and fall on their own sword as needs must. As soon as the risk-takers are gambling with client capital, in a tax-payer-backed bank, the depths of greed and recklessness are literally bottomless.