"He dug into the idiocy and negligence that produced the worst financial crisis since the Great Depression," Steve Kroft opened a segment of the March 14 CBS "60 Minutes," featuring author Michael Lewis' latest work - "The Big Short: Inside the Doomsday Machine."
If Lewis "dug into the idiocy and negligence," he did so selectively - or that's what viewers could conclude from the long "60 Minutes" report, which concerned itself with how "some of Wall Street's smartest minds managed to destroy $1.75 trillion of wealth in the sub-prime mortgage markets." Somehow, in a 24-minute report about the sub-prime mortgage meltdown, nobody ever said where all the bad loans originated.
Lewis told Kroft that the financial crisis was "a story of mass delusion."
"How can they not look at the numbers?" Kroft asked. "How can Wall Street be selling all these, buying all of these mortgages and repackaging them and not realizing they are not very good mortgages?"
It's a fair question. But so are these: "Where did all these bad mortgages originate? Why were loans being made to high-risk credits in the first place?"
Kroft didn't ask them because their answers wouldn't have fit the narrative. Just like his like-minded colleagues in the media, Kroft didn't mention the role of the 1977 Community Reinvestment Act in forcing banks to loan to high-risk credits - not to mention the central role of "government-sponsored enterprises" such as Fannie Mae and Freddie Mac.
The only mention of government culpability came when Kroft asked Lewis why financial institutions made so much money after the financial crisis.
"No one asked them how they made all this money. If you look at the businesses right now, they're heavily government-dependent," Lewis said. "You have access to a zero-percent loan in virtually unlimited quantities from the Federal Reserve. You can take that money and reinvest it in treasury bonds or in government securities agencies - you will get the spread - and you can do it over and over. You're essentially borrowing from the government and lending to the government, and taking a cut."
The banks and brokerages, according to Lewis, had little incentive to not act recklessly, and inevitably cause financial turmoil.
"Wall Street is able to delude itself because it's paid to delude itself," Lewis reminded Kroft. "And that's one of the central messages of the story - you have to be very careful with how you incentivize people because they will respond to the incentives."