Michael Lewis Tackles the Rigging of the Stock Market

Michael Lewis, author of Moneyball, The Big Short, and other best-selling books has come out with a new book this week called Flash Boys, which looks at high-frequency trading and how the stock market is rigged to make billions for a group of insiders. 60 Minutes talked to Lewis about his book this weekend.

Steve Kroft: What’s the headline here?

Michael Lewis: Stock market’s rigged. The United States stock market, the most iconic market in global capitalism is rigged.

Steve Kroft: By whom?

Michael Lewis: By a combination of these stock exchanges, the big Wall Street banks and high-frequency traders.

Steve Kroft: Who are the victims?

Michael Lewis: Everybody who has an investment in the stock market.

The Daily Show on the Shady Wall Street Deals No One Really Talks About

A private equity firm named Blackstone bought credit default swaps against a Spanish gaming company called Codere, betting that Codere would fail to make its debt payments on time, and then paid Codere to purposely miss a debt payment so that it would receive a payout triggered by the swaps. Blackstone made at least $15.4 million through the scheme, which was legal. On The Daily Show, Jon Stewart compared the scheme to buying insurance on a restaurant, and then burning down the restaurant to collect the insurance money.

Where They Really Care What You Wear to Work

You know that uncomfortable scene in The Devil Wears Prada when Anne Hathaway snorts when the Meryl Streep and the other editors are trying to put together an outfit for a shoot? The lesson was you shouldn't pretend that clothes don't matter at a place where everyone cares about clothes. Apparently, everyone cares about what you wear at Goldman Sachs too.

Q: “When Did You Last Take a Wall Street Bank to Trial?” (A: “…”)

Yesterday Senator Elizabeth Warren sat on her first Banking Committee Hearing. Awesome. At least this seven minutes was, minus the part when anyone talks but her. She asked a bunch of regulators when the last time they took Wall Street banks to trial. No one answered properly. (“We have not had to do it as a practical matter to achieve our supervisory goals.”). Warren asked a few more people a few other ways, still got no answer (“I can look that up”) and then followed up with this:

“There are district attorneys and U.S. attorneys who are out there everyday squeezing ordinary citizens on sometimes very thin grounds and taking them to trial in order to make an example, as they put it. I’m really concerned that too big to fail has become too big for trial. That just seems wrong to me.”

Killed it. Killllleeeedddddd it. (Killed it.)

A Peek into Wall Street’s Secret Society

There is a secret fraternity on Wall Street called Kappa Beta Phi whose inductees include successful financiers like Michael Bloomberg and former Goldman Sachs chairman John Whitehead. Each year the fraternity hosts an annual black tie dinner event to welcome new inductees, whom they force to dress in drag and perform skits and songs.

A Former Trader on How Easy It Is to Be Unethical on Wall Street

Chris Arnade, a former trader who worked on Wall Street for 20 years, explains in The Guardian why it's so hard to be ethical while working on Wall Street (a new report shows that 53 percent of executives in the financial services industry say that "strict adherence" to ethical standards "would make career progression difficult"). It's not surprising that money and greed would produce unethical behavior, but Arnade says that unethical behavior was supported by those around him.

The Daily Show on Wall Street Accountability

Last night, The Daily Show's John Oliver took on one of my favorite subjects: How the big banks have a tendency to break the law and suffer very little consequences for doing so.

Our Problem With Being Overworked

The longer hours we work, the less productive and efficient we are, so why have we built a culture where being overworked is more of a badge of honor and less of a reason to send people home at a reasonable hour? James Surowiecki looks at this question in his New Yorker column this week:

Among industrial workers, overtime raises the rate of mistakes and safety mishaps; likewise, for knowledge workers fatigue and sleep-deprivation make it hard to perform at a high cognitive level. As Solomon put it, past a certain point overworked people become “less efficient and less effective.” And the effects are cumulative. The bankers Michel studied started to break down in their fourth year on the job. They suffered from depression, anxiety, and immune-system problems, and performance reviews showed that their creativity and judgment declined.

If the benefits of working fewer hours are this clear, why has it been so hard for businesses to embrace the idea? Simple economics certainly plays a role: in some cases, such as law firms that bill by the hour, the system can reward you for working longer, not smarter. And even if a person pulling all-nighters is less productive than a well-rested substitute would be, it’s still cheaper to pay one person to work a hundred hours a week than two people to work fifty hours apiece. (In the case of medicine, residents work long hours not just because it’s good training but also because they’re a cheap source of labor.) On top of this, the productivity of most knowledge workers is much harder to quantify than that of, say, an assembly-line worker. So, as Bob Pozen, a former president of Fidelity Management and the author of “Extreme Productivity,” a book on slashing work hours, told me, “Time becomes an easy metric to measure how productive someone is, even though it doesn’t have any necessary connection to what they achieve.”

Because the person who stays late at work and demonstrates dedication to her job reaps all the rewards, right? Not always. Raise your hand if you’ve worked long hours and wasn’t rewarded for your hard work.

In light of the death of a Bank of America intern who worked long hours, junior analysts on Wall Street are being told to cut the number of hours they work down. Goldman Sachs, for example, told their analysts that they should be working no more than 75 hours a week (rather than the previous norm, which was to never go home). But as Surowiecki points out, it’s not just about cutting hours, but also unreasonable expectations. Because people who leave work and then go home to continue doing work because they’re afraid they’re going to get behind are just continuing the cult of being overworked in the privacy of their own home.

Photo: Tim Regan

Wall Street Firm Actually Admits to Criminal Conduct

Related to my post earlier this morning about enforcement at the Securities and Exchange Commission, hedge fund giant SAC Capital Advisors has agreed to plead guilty to insider trading, and the Times says this is "the first large Wall Street firm in a generation to confess to criminal conduct," which is pretty remarkable.

Breaking: Ethics on Wall Street Not Great

A new survey of hundreds of people working on Wall Street shows that even people working on Wall Street are distrustful of people working on Wall Street.