Novelist John Lanchester's I.O.U.: Why Everyone Owes Everyone and No One Can Pay is a book about the financial crisis that even people who hate reading about the financial crisis should enjoy. Funnier and more thoughtful than its peers on the current crisis bookshelves, it's an essayistic indictment of the culture of post–Cold War capitalism as the root cause of the crisis. It was even blurbed by Will Self! Resident crisis-book binge reader Moe Tkacik talked to the author about how the "douchebag culture" of bankers helped cause the crash and why, despite the vastness of their crimes, there will probably never be a Wall Street version of The Wire.
So, John Lanchester: When you're not writing novels, you review Naipaul and Nabokov for the London Review of Books and the New York Review of Books. Why bother parsing such turgid esoterica as the structure of CDO-squareds?
Well, it's a great story, for starters. But my father was a banker, so it was always less alien to me, I suppose. The project started as an outgrowth of a novel I was writing in which the main character is a banker. I was just sort of marinating in the stuff anyway, and the LRB asked me to do a few pieces on banks, and then Northern Rock blew up. And basically what happens every time I finish a novel is that I stick the draft in a drawer and tell myself that now is the time to learn German or take up Pilates, and then before I know it three months have passed and I can look at the draft again. If I were a rock band, [writing the book] would have been a side project. Of course, it was too effective as a distraction technique, and now I feel like I'm going to pick up my novel and find a 600-page book about bunny rabbits or something.
You've joined some crankier critics praising the (realistic!) The Wire as ne plus ultra of contemporary novels. Why not try to write The Wire of high finance?
The thing is, fiction has to seem true, and the finance world is full of things that are just so unlikely you can't write about them without addressing the subject of their unlikeliness. Like [Goldman Sachs CFO] David Viniar saying that it was a "25 sigma event" when it turned out poor people couldn't afford to pay their mortgage resets. You really could not make that shit up, and if you did make it up, it wouldn't be interesting. It's only interesting because it's true. I would love to see The Wire of Wall Street, but I just don't know if you could do it.
Because Wall Street is simply too big and too technical, or because guys like David Viniar aren't compelling/sympathetic-enough characters?
For one thing, scenes are very hard to dramatize. So much of the drama in finance hinges on esoteric technicalities. It's hard to think how you'd explicate the stuff to a larger audience without adopting an irritating narrative gimmick along the lines of the proverbial "Tell me, professor" scene in science fiction. As for bankers, I find the people at the other end of the food chain more interesting. The victims have a more kind of human appeal to me. With regard to the bankers themselves, less so. I don't think this was always the case; one of the books I read as research for the novel was this four-volume history of the City of London by David Kynaston, which starts in 1815 and goes up to the present day. And in the introduction to the fourth volume, he writes a disclaimer, something along the lines of, "I have to warn you, reader, the people in this volume are less interesting than the ones who populated the first three volumes. They work so hard, their lives are so completely consumed by their professional ambitions, it's rare that anyone gets the time to become interesting." When you look at the history of finance, the people seem strikingly smaller now than they did in the era of, say, J.P. Morgan. While the systems and the ramifications of what they do is much more interesting, the attention and rigor and ambition and labor required to rise to the top of it doesn't leave a whole lot for much else.
Your critique of finance is the only one I've read that, while giving due credit to the flawed regulatory regime and "incentive structures" and whatnot, zeroes in on the banking culture, promulgated by platitudes as "lunch is for wimps," "sack the bottom 10 percent," and "if you can't measure it, it isn't real." Do you agree that most of the crisis books have elided the problem of "douchebag culture" to everyone's peril?
Well, as you know, there's a scene in the Lehman Brothers memoir A Colossal Failure of Common Sense where he goes out to Southern California and meets the subprime mortgage meatheads taking their three-martini lunches. It's shocking and very, very vivid, and by the end of the scene you completely believe it; okay, those were the assholes who were pumping these things onto the most vulnerable lenders, it makes sense now. What makes the scene all the more compelling is that there are so few like it, which goes back to the one thing I will never get over about this story: Wall Street employs thousands upon thousands of analysts and consultants who are paid to scrutinize this stuff. All any of them had to do would be to get into the elevator, go down 30 or 40 stories, catch a cab to Penn Station, and take a train pretty much anywhere where they were selling these things, and just spend a morning talking to literally anyone in the real-estate business. That's all it would have taken to uncover this massive systemic just sort of crazy levels of unsupportable lending glaring everywhere, in your face. And yet so few of them connected the dots.
But even now that the dots linking "obscene bonuses" to "widespread economic devastation" have become clear, you are pessimistic about the prospects for a cultural shift, depicting London financiers as largely indignant about being vilified — perhaps because the U.K. is taxing their bonuses now — whereas in America, where there seems to be a much stronger current of populist outrage actually running within the financial community, we seem to have achieved approximately nothing in terms of curbing the excess.
Well, it's a very common attitude in lots of parts of Europe to assume that if someone's rich that they've stolen the money, or that anyway, they inherited what one of their ancestors must have stolen. Theft is broadly construed as the source of all wealth. That worldview at the moment is quite true, although it is still a bit blasphemous to think so in America, where the philanthropic efforts of men like Bill Gates and Warren Buffett have tended to cast capitalists in a socially conscious light. It's different in finance, which people go into with the goal of making money. That said, I think bankers everywhere really, really mind the public opprobrium, and that's why we have to keep at it.
To that end, how do you feel about now–Treasury Secretary Tim Geithner?
Well, he was part of the team that averted a Great Depression, let's not fail to award the coin. But they've missed a historic opportunity to kick some butt and take some names and impose some real curbs on this behavior, and those are going to be some very expensively missed opportunities. Because if you had proper reform, there would be no reason for it to happen again. The rescue was one thing, but the failure to act on it is gonna have the potential to be really catastrophic. The system is not fixed. It is nowhere near fixed.