Liar's Poker

by Michael Lewis

Trader Tom DiNapoli fondly remembers a call from one thrift president. “He wanted to sell a hundred million dollars-worth of his thirty-year loans [bearing same rate of interest], and buy a hundred million dollars of some other loans with the cash from the sale. I told him I’d bid [buy] his loans at seventy-five [cents on the dollar] and offer him the others at eighty-five.” The thrift president scratched his head at the numbers. He was selling loans nearly identical to those he was buying, but the difference in yield would leave him out of pocket an unheard of ten million dollars. Or, to put it another way, the thrift was being asked to pay a transaction fee of 10 million dollars to Salomon Brothers. “That doesn’t sound like a very good trade for me,” he said. DiNapoli was ready for that one. “It isn’t, from an economic point of view,” he said, “but look at it this way, if you don’t do it, you’re out of a job.” A fellow trader talking to another thrift president on another line overheard DiNapoli, and cracked up. It was the funniest thing he had heard all day. He could picture the man on the other end of the phone, just oozing desperation.