Liar’s Poker

Rotund, loud, unkempt, and brilliant, Ranieri gets drafted as the first trader in Salomon’s mortgage department and helps them develop the market for mortgage-backed securities. At first skeptical of these new financial instruments, Ranieri becomes an enthusiast. Before long, he runs the department, the most profitable and meanest tempered at Salomon, while encouraging practical joking, overeating, and cigar smoking. He claims in 1984 that “his mortgage trading department made more money that year than the rest of Wall Street combined in all their businesses” (113). He is considered emblematic of all things Salomon.

The Salomon Brothers chairman’s name is “pronounced Good friend” (13), but a sudden visit from him at their trading desks could strike terror into the hearts of his employees. Portly and grayhaired, he “was so intensely calm and deliberate that he made you nervous” (73). Gutfreund “seemed able to smell money being lost” (13). Many of his later decisions are self-serving and ham-handed, contributing to Salomon’s eventual fall from the heights of Wall Street.

Dash Riprock is a pseudonym for “a proven money-maker” (197) at the London office of Salomon. He suggests to Lewis that he “[s]hort the stock of Salomon Brothers” (196). This is illegal, and Dash is joking, but he is prescient about Salomon’s long-term prospects. He dispenses many pieces of cryptic trading wisdom to Lewis during their time together.

Alexander, a pseudonym, is a salesman who moves from Salomon’s London office to the New York building. His deals are so clever that managing directors seek him out for investment advice. Alexander mentors Lewis over the phone several times a day, and Lewis learns how to “think and sound like a money spinner” (217). Alexander is a contrarian who bets against the crowd. He and Lewis develop a new mortgage product, only to have the credit stolen by another salesman.

Milken attends college at Wharton, where he begins work on his revolutionary theory about junk bonds (risky investments that have little chance of being repaid), which he realizes are so undervalued that they outperform blue-chip stocks. At Drexel Burnham, Milken—an arrogant, tactless, and uncouth manlike Lewie Ranieri at Salomon—becomes a bond trader and transforms junk bonds into hugely popular securities, which allows Drexel to overtake Salomon Brothers as the Wall Street profit leader. Milken moves his operation to Beverly Hills; in one year he earns $550 million. He pays his employees lavishly based on performance rather than “how many people worked for you, whether you had a seat on the board of directors, and how many gossip columns you appeared in” (264).

As a Salomon partner, Dall realizes that the future of investing may lie with mortgages, which can be pooled together by category and sold as bonds. In 1977 Dall helps create the first mortgage-backed securities, and Salomon becomes the leader in the field. Lewie Ranieri joins him at the mortgage bond desk, eventually replacing him as its director.