Interview with Robert Levey
By Carin Chea
Reviewed as "ingeniously inventive," Robert Levey's novel, "Risk (A Tale of Wall Street)" is everything a good story is composed of - a rewarding hero's journey, relatable conflict, and a fierce underdog of a protagonist we genuinely care for.
An unequivocal expert in finance, Mr. Levey pens a drama that is fiscally accurate and acute, yet is not simply a story of the economic market. Despite it being a cautionary tale of Wall Street disaster, one does not have to be a financial enthusiast to enjoy Risk.
Ultimately, it is a compelling narrative of perseverance, wit, and (most importantly) integrity in the face overwhelming moral debris.
You've spent a tremendous amount of time working with the trade systems on Wall Street. Tell me about your background and how you became an expert in finance.
I was attracted to Wall Street. It's an exciting place. Right out of college I wanted to go there. I worked in computer systems. I worked a lot on collateralized business mortgages. At one time, they were quite legit.
At that time, the only thing you had to worry about was if there was pre-payment penalty. Most of the mortgage firms worried about these things.
When I got out of the business, I read about the sub-prime business, and I experienced a real bolt of disbelief. I took a long look at CDOs (Collateralized Debt Organizations). These things were somewhat un-holy and totally new.
JP Morgan and Chase never had the idea that these things should be used for mortgages, which is why when the mortgage crisis broke, JP Morgan and Chase were the only ones left standing.
I realized that when you're on Wall Street, the best place you can be is to invent a new product. What happened was that while they were inventing product after product, the CDO went under a cloud of obfuscation.
I was very impressed with the ability of Wall Street to collateralize anything. Any stream of payment. Student loans. Car loans. I said, "Why don't we build a novel based on someone who built a new product that collateralizes people's salaries, and see how it collapses?"
Eventually, the same house of cards that crumbled in real life crumbles in this novel.
I admit I am a complete novice in this arena. What is a "financial insider?"
Somebody once said, "If you can't explain it to an 11-year-old, it's probably a bad investment." This stuff isn't complicated. You give someone money for something, and they promise to pay you back.
A financial insider is someone who sells stocks and bonds and is involved in the selling of this stuff. It's presented with an air of mystery, but there really isn't.
What happens in the book is that the ratings companies were so enthused about rating these companies that they became the ones not looking at the quality at all. The heroine of the story is a ratings analyst who says, "I can't do this anymore. This is junk." She says to her people, "You can fire me if you want, but I'm rating this bond as 'junk'."
How did you transition from financial expert to writer?
It's always been a passion. I write because I want to and I enjoy the process. When I first wrote this story, and I handed it to someone to look at it, he said, "This is nice, but..." I really tried to explain the financial aspects of it, but in the end, nobody understood it.
If someone wants to buy a financial textbook, they'll go to the university bookstore, not Barnes and Noble. They told me, "Bob, you got to really drive this through the eyes of someone who is going through it."
My daughter is a music teacher for elementary school. She read it and enjoyed it. If you want to get people to invest and enjoy a book, you got to pull them along, entertain them. You have an obligation to them to make it a pleasure to read.
What I learned was that Superman is a lousy protagonist because he's almost perfect. You can't beat Superman. In a story, you need people who are flawed and you have to work through those flaws.
Here's Francine [the protagonist] in the market and she's as rough-and-tumble as everyone else, and she comes into a moral and physical conflict. She's not perfect. There's a line in the sand. She sees what's happening in the market and realizes, "We can't keep doing this anymore."
She starts doing her due diligence and looks into the quality of what she's investing in. But, the rest of Wall Street doesn't do that and they collapse. Literally the rest of the world blames her for this collapse, and she has to stand tall. But, I made it her story, not the market's story.
How did your book Risk (A Tale of Wall Street) come about? What was the catalyst that catapulted Risk into existence?
I investigated how CDOs worked. I realized it didn't make sense and wondered: "Why would anybody do this?" They created a bunch of bad loans and created an index of it. They created bonds based on those indexes.
They were junk bonds. They failed and all the side bets failed. It was all synthetic. I couldn't believe it. I didn't understand the mechanics because it seemed so stupid. That's when I got the idea: "If they can do this, they can do this with anything."
It's all based on the notion that if you take a bunch of small things, and make it too complex, and there's too much fine print, people won't look at it. You put that much information in and it's impossible to swallow it all up. It becomes an institutionalized failure.
Who or what were your biggest influences during the creation of Risk? How much of your novel is based on true events?
Some of the stuff that happened to Francine is fantasy. But, some of the characters - they were composites of people I've known. The head of the department and her chief salesmen are composites of many hustlers I've run into in the business. There are a lot of them out there.
People ask me: Will it happen again?
There will always be another one and it will always come from a different source than the previous one. For example, I suppose they've cleaned up the mortgage mess, but there'll be another source. Everything is connected very tightly. If one bank fails - well guess what? They owe money to another bank. You could have a contagion to this effect.
Who is Francine Dubois and who does she represent?
Francine is a female. She comes in, and she's short and diminutive. She's French, and she's the one that has the temerity to knock your socks off and change everything. She runs into 2 enemies on Wall Street: The market, and the people around her.
She finds that the people around her are taking all her ideas and her work. She decides to go out and sell bonds on her own. There's also a romantic sub-plot. She hooks up with another trader and they sell bonds together.
Francine's got moxie. She's interesting because she has to stand up to a whole bunch of men who say, "Come on, you're really cute, but we're the ones making the money here." And, not only does she end up surviving, but those men end up going to jail.
Her journey is one of "Should or shouldn't we do it? Should we take the risk?" Her paramour says, "That's our business! If we're not willing to take the risk, we shouldn't be in this business!"
What are your thoughts on the housing and financial crisis that happened in 2008?
William McChesney Martin [Chairman of the Federal Reserve from 1951 to 1970] said: "The job of the Feds is to take away the punch bowl when the party's just getting started."
But you see, nobody wanted to kill the golden goose. There were plenty of warnings. Nobody wanted to touch the punch bowl.
If nobody saw what was coming, that means nobody was looking. The job of regulators is to regulate. Nobody likes regulation. When you're a kid and your parent puts a curfew into effect, you don't like it. Everybody got caught up in the euphoria. The market was doing so good.
When that happens, they lose their sense of portion and countenance. You can't just let wall street run the show. What people don't understand about this crisis, as opposed to other crises, was that banks were running to the other banks saying, "Give us our money."
The banks were tied up in their own nonsense and nobody was paying any real attention to it. It didn't take much for stuff to fall apart. Nobody was looking. What's the cure? Look!
How does Risk differ from other financial tales like Wolf of Wall Street or The Big Short?
Those were stories about real people and real events. Risk is a story about imaginary possibilities. There is no reality here. In that sense, The Big Short and The Wolf of Wall Street are history books. Risk is a novel.
If you could go back in time - to any time as early as the invention of currency or even before - what aspect of financial history would you change?
That's a tough one. I might go back to 1929 and tell the Federal Reserves to open up the gate and make everything liquid.
But, coming back to modern times and the recent mortgage crisis. I think the Federal Reserve and the Office of the Controller should have done their jobs and looked inside. The ratings agencies should have gone out of business for the terrible jobs that they did. But, they were able to get away with it. They should've done their jobs and looked at what people were holding. Nobody looked.
That really upset me, personally. That's why I wrote the book.
Risk is a fictional account of just how wrong things could go in the market. But, in this case today's fiction could be tomorrow's headlines. Risk (A Tale of Wall Street) is currently available on Amazon. For complete updates on Robert Levey's recent and upcoming projects, please visit www.RobertLevey.com.
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