The Security Analysis Podcast Liar's Poker
9 snips
Jan 29, 2025 
In this lively discussion, Matt Cochrane, a financial commentator and co-host, dives into Michael Lewis's 'Liar's Poker,' shedding light on the explosive Wall Street culture of the 1980s. He details the rise and fall of mortgage bonds and the ethical challenges faced by Salomon Brothers. Cochrane highlights Warren Buffett's intervention during the Salomon scandal and contrasts the reckless trading culture of the era with today's practices. The conversation also touches on the high-stakes game of Liar's Poker, revealing the audacious spirit of traders.
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Salomon Brothers Experience
- Lewis's initial experience at Salomon Brothers involved a difficult training program and a culture of intimidation.
- He observed how the firm created and profited from mortgage bonds, a product that later contributed to the 2008 financial crisis.
Hubris and Downfall
- The creation of mortgage bonds at Salomon Brothers, while initially successful, eventually led to the firm's humbling.
- This highlights how hubris and unchecked growth can lead to downfall, a recurring theme in financial markets.
Mortgage Bond Innovation
- Salomon Brothers revolutionized the mortgage industry by creating a secondary market for mortgages through mortgage bonds.
- This innovation dramatically increased capital flow into housing but eventually led to systemic instability.
