Liar's Poker Review

Jason Hoang Nguyen

Principles of Finance

Professor Jay Chen

Liar’s Poker Book Review

“Liar’s Poker” by Michael Lewis captures a perfect moment in the history of the American financial system. The book’s setting of 1980s was an era of government deregulation where less-than-conscientious people took advantage on other’s ignorance. These people - Wall Street traders - were able to gain considerable wealth in very short time. The author also made fine fortune writing about them.

The book is about bonds trading at Salomon Brothers, one of the most prestigious companies on Wall Street. Salomon hired Michael Lewis fresh out of London School of Economics in 1985. Lewis describes how he got the job with great pride of being “in the right place, at the right time”. Indeed, the 1980s was a great decade to be at the right places for highly educated professionals in the financial services industry. The author describes how he did not understand the job how he went through the complex training and how he succeeded in creating money both for him and for the firm.

The first chapter describes a risky antic of the traders, “Liar’s Poker”, where traders risk thousands of dollars on a bet that satisfy their ego more than their wallets. The game perfectly describes the corporate culture in the firm and in the industry in general. It is a corporate culture of egotistical intelligence, greed, everything-goes capitalism, and the willingness to manipulate markets in pursuit of profit. Indeed, the firm’s rise and decline were attributed to this culture.

Lewis details the rise of Salomon with the rise of mortgage trading. Prior to the U.S. government’s decision to allow savings and loans fund managers to sell mortgages as bonds, Ranieri, a Salomon trader, had created a market for them. The law’s sudden creation put the firm in an advantageous position. It brought the firms tremendous profits and consequently, even more ego and greed. However, the author verdicts that the firm...