Posts Tagged ‘Michael Lewis’

Book note: The Fifth Risk by Michael Lewis

February 26, 2020

When Donald Trump was elected President in 2016, he and his team declined to be briefed on the work of the government they were now in charge of.  This was unprecedented.

His appointees were also contemptuous and willfully ignorant of the work they supposedly supervised.

Michael Lewis, a well-known non-fiction author, took it on himself to get the briefings that Trump declined.  The result is his 2018 book, THE FIFTH RISK.

He showed the harm that Trump administration is doing.  We Americans are at risk of a hollowing out of governmental capability equivalent to the past few decades of hollowing out of manufacturing capability.

But the real interest in the book is his report of work and accomplishments of American public servants.  He shows what we are in danger of losing.  It is a shame, but not unusual, to not value what you have until you are in danger of losing it.

Lewis wrote chapters about the Departments of Energy, Agriculture and Commerce, all of which have priorities different from what I thought.

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The Department of Energy, for example, is not devoted to energy in general.  It devotes about half of its $30 billion annual budget goes to maintaining the U.S. nuclear weapons arsenal.  About $2 billion of that goes to tracking down the world’s missing weapons-grade uranium and plutonium before it falls into the wrong hands.

Another one-fourth of the DoE budget goes to cleaning up nuclear sites, including $3 billion a year for the ongoing mess at Hanford, Washington, where the plutonium bomb was developed during World War Two.  The DoE runs 17 national physics research laboratories, such as Brookhaven, Fermi and Oak Ridge and also sponsors research on renewable energy.

Lewis asked John MacWillaims, the former “chief risk officer” for the DoE, to list the five top risks he worried about  The top risk was an accident with nuclear weapons.  Other risks involved North Korean nuclear weapons, the possibility of Iranian nuclear weapons and accidents to the electrical grid.

The fifth risk, MacWilliams said, is what he called “program management”—or what former Defense Secretary Donald Rumsfeld would have called “unknown unknowns.”  These are the risks you don’t know about because you never bothered to find out.

Donald Trump’s first budget eliminated the Department of Energy’s research program on renewable energy, and the largely successful $70 billion loan program for renewable energy startup companies.  It eliminated research on climate change.  It cut funding to national research laboratories so much that they had to lay off thousands of people.  It halved funding on work to protect the national electrical grid from sabotage or natural disaster.

“If your ambition is to maximize short-term gain without regard to the long-term cost, you are better off not knowing the cost,” Lewis wrote. “There is an upside to ignorance and a downside to knowledge.  Knowledge makes life messier.”

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Who’s running this country anyhow?

September 29, 2014

Carmen Segarra, a bank examiner assigned by the Federal Reserve System to Goldman Sachs, was fired after refusing to withdraw a report criticizing Goldman.

Theodore RooseveltShe made tape recordings showing how subservient the other Fed examiners were to a company they were supposed to regulate.

The country is being run by the kind of people that Theodore Roosevelt called “the malefactors of great wealth” and “the criminal rich class.”  The fact that certain people are rich does not, in and of itself, entitle them to respect or deference, let alone immunity from laws and regulations that other people have to obey.

LINKS

The Secret Goldman Sachs Tapes by Michael Lewis for Bloomberg View.

Inside the New York Fed: Secret Recordings and a Culture Clash by Jake Bernstein for ProPublica.

NY Fed Fired Examiner Who Took On Goldman by Jack Bernstein for ProPublica (2013).  This has more details on the problems with Goldman Sachs than just what was on the recordings.  [added later]

Fed Whistleblower Carmen Segarra, Edward Snowden and the Closing of the Journalistic Mind by Yves Smith for naked capitalism.  [added later]

The Secret Recordings of Carmen Segarra, an interview by Ira Glass for This American Life.

The financial markets on automatic pilot

June 24, 2014

flash-boys-jkt_1In a well-ordered economic system, financial markets provide a means for business enterprises to obtain financing and for investors to judge the worth of a business.

Flash Boys, the latest book by Michael Lewis, tells how far the financial markets have gotten away from that purpose.

His subject was high frequency trading, a method of skimming money from other peoples’ financial transactions.  Enormous expense and ingenuity has gone into perfecting high frequency trading.  But from the standpoint of social good, the only question is to what degree it is extremely dangerous, moderately harmful or  merely useless.

High frequency trading is done by computers, because human beings are too slow.  Computer trading accounts for about two-thirds of transactions on U.S. stock exchanges.  There is even a venture capital company that has a computer algorithm on its board of directors.

The science fiction writer Charles Stross wrote about futures in which artificial intelligences incorporate themselves in order to gain legal standing as persons, and in which computers and robots have created a fully functioning society while human beings die out or are sidelined.

I don’t expect this to happen, of course, but it is a good metaphor for what is going on.   Putting such a large part of the financial system on automatic pilot is reckless, especially in an economic recovery that is fragile to begin with.

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Click on Scalpers Inc. for a review of Flash Boys by John Lancaster in the London Review of Books.  Hat tip to Steve Badrich for the link.  I haven’t read the book myself.