Whats the cost of this . Its very hard to measure but i can tell you that its not cheaper for corporations to raise capital in the stock job t how to take money for middleclass people and transfer it themselves rich people. So what does that do . And compromises our educational system. Some people on wall street. It perverts their ambition and it creates this is a moral problem. Its a technic this problem and what you get in the end is what we have right now, which is a Financial System that nobody trusts, that can persuade to be trusted because they watch what they did in a financial crisis and whose interest are completely out of line. We dont want that relationship. Society cant function if the interest underlined because then what you get is people with money influencing it, influencing the political process, the direction of regulation and you get to that cant collaborate and thats the problem we are facing. This is a microcosm of the problem so yes we are only losing a penny but the story is much more complicated than that. Host up next to sean in battleground washington. Sean thanks for holding on. You are on with Michael Lewis. Caller mr. Lewis you were just on it but it seems conservatives like Charles Murray and all the conservative think tanks they project onto poor people all of the corruption and wickedness that they themselves are guilty of. 15 years ago in the summer of 99 roger ailes was a guest with brian lamb and i called them up and roger ailes of course was instrumental in starting fox news and cnbc and rush limbaughs career and all that and i passed mr. Ailes about the Specialist Firm that was from running the tape and of course off my question but then five years later the sec levied something close to 250 million of fines on the Specialist Firms were for running the tape. So i was wondering if you could address the questions of conservatives projecting. The country would be surprised to know that our nation is run by cocaine snorting frat boys. [laughter] its really a crime if liars poker is an turned into a major motion picture. I just saw the woeful wall street yesterday and i think liars poker would be even better. Host sean we have a lot of callers on the line. It lets leave there. Thank you. Guest so can i run one particular i will start by recommending hollywood listen to what he said because i think would be great but i dont have any control over that. One worry i have for the story i just told is its clearly causing an uproar. More of an upward than anything ive written in my life. The only thing it reminds me of actually very closely was a smaller sphere was moneyball which disrupted baseball. Rethinking environment and in this case you have disruptive entrepreneurs introducing reform through the market on wall street which is a much bigger stage. My fear is that because, because it may be party politicized. When eric holder as he did yesterday announces as they shared a Justice Department investigation all of a sudden it becomes liberal versus conservative. It becomes democrats against rich wall street guys and republicans line up to generate Campaign Funds by wall street and find arguments to make serious arguments but nevertheless we get back to this poisonous sort of, back in the poisonous debate where everything is zerosum. What i love about this story is it isnt that way. Conservatives should see that this is a market solution. I mean the spirit of the heroes of this book, its a very conservative spirit in a way. They are not looking to the government to fix the problem. They think the market can fix the problem. So the broader question on who is to blame for whether wall street is properly regulated, i think its more complicated than a Party Political problem. I think the problem is that for a bunch of reasons wall street all of a sudden started making much more money than it used to make. Im talking the break happened in the world 30 years ago and its very hard for regulators to regulate an industry which people are so much better paid. There should probably just be someone out there that if a person is being regulated makes more than 10 times the regulator the regulation will never happen. Something like that but to add to that you are dealing with every case where regulation is called for. It ends up being an arcane imploring argument between specialists and so much smoke and dust drawn by both sides, the public can participate. Its too complicated unless you are going to spend your whole life paying attention to that one little regulation. So it ends up being by nature kind of the backroom deal and you have a backroom deal and theres a lot of money in the front room its part of the backroom deal to achieve what society would like them to achieve. Host calling from Portland Oregon hi calling you are on with Michael Lewis. Caller hi. Im not worried about Goldman Sachs but im wondering how you can fix this problem and not the market, the only market we can invest in and not jeopardize the portfolios of the little guy. Guest the market is pretty clearly already uneasy, and made uneasy things that are happening in the market. Things like the flash crash. The problem of confidence in the Market Structure is its not a problem of appearances. The problem of reality. If the Market Structure is inherently unstable eventually even if people temporarily have confidence, that confidence will be shattered so how do you fix the problem . You expose the problem and you work with people who have a solution to the problem. So thats what the story is about. Its about fixing the problem. Its about people actually figuring out a way to make the market stable and reliable and trustworthy. Im not worried about Goldman Sachs. So i think that i feel like its funny, i feel the first half of this book is kind of depressing when you learn about what actually happened in the second half is figuring out the solution is extremely helpful helpful and the choice is so stark between fairness and unfairness in there so much noise about what they have done i think its all very helpful. Host somebody we havent talked about. Who is there j. Aleynikov. Guest sergei linew cough is how i became interested in telling the story. He was a High Frequency trading Computer Programmer at Goldman Sachs in 2007, 2008 andy leaves Goldman Sachs in 2009. Before he leaves emails himself some computer code some of which he had been working on some of which he had not been working on. Goldman sachs sees this former employee had gone to work for High Frequency trading firm and Goldman Sachs instantly in a matter of hours calls the fbi and the fbi instantly arrests sergei aleynikov. And a trial is held in the sentence for stealing the computer code. His conviction was reversed but only after spending a year in jail. What caught my eye was i had three questions in this. One was we had just come through this financial crisis which Goldman Sachs had a lot to do with any other person ends up in jail was the person that Goldman Sachs wants put in jail. Thats very strange. Why . What did he do . What was such a big deal that he deserved to go to jail but people who tank the entire economy dont have any exposure. The second thing was the prosecutors who went after him said after he was arrested he couldnt go back out on the street on bail because it was so dangerous to have someone who had access to this computer code because the code be could be used come i cant remember the language but the effect was crashed the Financial System. Disrupt markets and if it were in the wrong hands that could happen. I thought access in the wrong hands . We are supposed to believe that these wall street firms have code that could be used to do bad things in the markets but thats okay and this guy who is left in his hands and we have to put him in jail so that made me curious. Finally the other thing was he was engaged in High Frequency trading a term which i dont think if the newspapers. So whats that . Wall street generates these terms and they say yeah they know what it is but i do know what it was. Mostly people asked on wall street did know what it was either. I was clearly so valuable that it caused Goldman Sachs to hit the panic button. They called the fbi . Nobody does that. They dont really do that almost three. There are other ways to handle the problems. So i started to ask around about what this was. High frequency trading and this is where a stumbled on brad caggiano. At that point he had been wanting had been wandering through the offices of some of the most most, biggest most sophisticated Money Managers on the planet and telling them what he had found out about what highfrequency traders were doing and Goldman Sachs at that time was among them. People said to me look theres a lot of noise about the subject right now. There is no one who can describe this in 2009 like this guy. He works for the royal bank of canada. I have no idea how he know so much and how he figured out is insane. I went to him in the first place to figure out whether sergei aleynikov. Whether it was valuable and should he be guilty and he helped me understand that and he helped me understand really the tragedy that happened in initial process. The jurors, there was no way anybody was left with a true understanding of what had happened. But in him explaining sergei aleynikov. He was explaining this thing that happened in the stock market and i thought my god what a story. Sergei aleynikov. Became a book and it became a magazine piece. Some of the stories in the book but the guts of the story was this young man who is trying to figure out how to reform the entire u. S. Financial system. Host we are talking with Michael Lewis and flash boys is his most recent book. Jim in iowa. Caller thank you for this book and bringing attention to this font, much has been a problem for a long time. I wonder if playing any part of the obvious manipulation of the gold and silver markets for example where a lot are astronomical amounts triggering cell stops to manipulate the market lower and if its threatening the global Monetary System . Are they a part of that . Guest in the interest of trying to Say Something that doesnt bore people who are listening theres an observation that who has been watching the commodities markets . The Foreign Exchange market and that is its how much manipulative activity in the prices of things have been going on. The libor scandal in london, the Foreign Exchange trading scandal and it also raises the question, as has always been going on and we didnt know about it or are we in this great age of manipulation of the markets by the giant actors who sit at the center of the markets and the stock market being one of those markets. I dont know the answer to that but i have a suspicion and my suspicion is that broadly what has happened in the Financial System is technology through the computer has different technology, has greatly reduced the necessary role of wall street. Wall street used to make money standing between buyers and sellers and so the firms they actors on wall street have been forced to find other outlets for revenues and one of those outlets has created complicated things that people they seldom do dont understand. Another may be mucking around the markets that really shouldnt be mucked around in that i do not know the answer to this question. Host all of this research Michael Lewis what is your understanding of the market . Do you think you understand it fully . Guest no. The stockmarket . I understand it well enough to write the story and im convinced that deep misunderstanding of the market is held by the main characters in the book. But its breathtakingly complicated. For example there are 150 different order types that highfrequency traders can use to submit the stockmarket and most are designed not to trade, to move the price around and i dont know all of them. I know eight of them. If one of them allowed its incredible so i can give you an authoritative account of all the order types. I can give you a broad description of what they do in a few examples. I can tell you this. I know now enough about the stock market that i know i dont want to know anymore. And what really needs to happen is that needs to be simplified and clarified. It needs to be understandable and it shouldnt be secretive. It doesnt need to be this complicated. Host are you in the market . Guest yeah absolutely. My first reaction to learning what i learned when i started investing in the story was ill take some of my money out of the market completely just so that if this calamity that seems like its possible happens i dont feel like a fool for having at least people tell me to watch out for did not do anything. What i dont do is bother to pick stocks. I think its a fools game. And certainly for me i just dont have the interest. I try not to lose my money. I do the market in two ways. I basically buy index funds and another version of this is i get my money to Warren Buffett and let him worry about me. I buy shares in berkshire hathaway. I figure whatever happens he will be able to defend me. Whatever we want to do is not think about this. I want to think about writing stories so thats how i do the market. Host bill in tucson arizona please go ahead with your question or comment. Caller i have been involved in the market for over 50 years. My question is regarding the corporations that have their stocks listed on the New York Stock Exchange and other exchanges and their reaction to highfrequency trading and a feeling that their stock prices are being manipulated by these highfrequency traders. Guest thats a great question. If i had been a better writer would have found some way to weave it into the book because you look at the interest and the book is framed as a story essentially a dance between predator and prey, the prey is framed in the book being investors in the market, people who are buying and selling stock in Holding Stock for more than a millisecond. And the predator being the highfrequency traders that its true that theres another party in a transaction that you never hear from and probably we should hear from and that is the real economy out there. The purpose of the stockmarket is to channel Investment Capital to people in to people in and put it to productive uses. All this nonsense has nothing to do that. Its a lot of unnecessary financial so how do some corporation built by the stock. People at facebook werent happy about their ipo. Ive talked to people about that kind of thing where the glitches were so obvious that they would throw up their hands and say how can it be like this . But i think thats a constituency that needs to start to go to capitol hill and say look, this mucking around in the market, how much dollars these guys are taking up maybe a big deal. We need this market to be sound and stable and read their stock prices to feel like theyre reflecting something. So this is a long way of saying its part of the story i never got to. I i never went and interviewed Corporate Executives about how they felt about these people and my guess is in most cases they dont know about it. They are not aware of it so as not high on their list of concerns. They are busy running their business but maybe now they will get interested. Host john and madison alabama. Caller mr. Lewis i certainly appreciate hearing what you have had to say today in what youve done with your book. The question ive got is with the Federal Reserve and the u. S. Treasury and im trying not to be political like you said earlier. I agree with you about that but with all of the things and the money that is being put in by our government how is this impacting that and desist making them more and stable . Guest the stimulus takes many forms. Its zero Interest Rate policy. Its quantitative easing. Its buying bonds in the market to try to lower longterm Interest Rates to stimulate economic activity. This is a big big discussion and everybody will be stupider who is listening if i dilate on it for too long. But what you need is a panel of economists who disagrees over one n see that nobody knows. What is clearly true is that the stockmarket is the beneficiary of easy money and would also seem sort of true is that for some time now the Federal Reserve in my view has spent too much time worrying about levels of the stockmarket. I feel government policy seems to respond to the stockmarket as if keeping the stock market up as a goal rather than something that should happen in the stock market should go where it goes kind of thing. Does it contribute to instability . It certainly doesnt in a new direct waved play on the structure so i would say no and i would also add that the problems that say ben bernanke faced when the Financial System basically collapsed in 2008, the decisions they made to deal with the problem of money was i think whether it was ultimately wrong or ultimately right was a brave decision and i think is probably right given the government was paralyzed. It was the oneway to prevent depression from happening. Everything that happens after that is a secondary concern. So i actually think ben bernanke is an american hero. I do. I think what that man did is incredible and he is taken all kinds of grief and i have said nasty things about him im sure. He didnt see the subprime crisis coming but given the hand he was dealt to play he did what