Against the Rules: The Big Short Companion

Episode: How the Financial Crisis Broke Wall Street

Date: November 18, 2025
Podcast: Against the Rules with Michael Lewis
Host(s): Michael Lewis, Lidia Jean Kott
Main Guest: Matt Levine, Bloomberg Opinion columnist

Overview

This episode marks the 15th anniversary of Michael Lewis’s seminal book The Big Short, reflecting on the lingering impact of the 2008 financial crisis. Michael Lewis and co-host Lidia Jean Kott use the occasion to examine how the crisis reshaped Wall Street, transformed financial institutions’ status and structures, and influenced phenomena like Bitcoin and stablecoins. Michael Lewis dives deep with Matt Levine (ex-Goldman Sachs banker and finance columnist) to unpack long-term consequences on the financial system, including a candid discussion of lessons learned (and missed) and the ongoing evolution of risk in finance.

Key Discussion Points and Insights

1. The Immediate Aftermath: How Wall Street Changed

(02:38–04:51)

• Michael Lewis and Lidia Jean Kott identify a significant status shift on Wall Street:
  • Before 2008, big investment banks (Goldman Sachs, Morgan Stanley) were “the place to be”; now, newer institutions—hedge funds like Citadel, Jane Street, and private trading firms—dominate the action.
  • Michael Lewis attributes much of his insight into post-crisis Wall Street to reading Matt Levine, appreciating Levine’s ability to “find what’s interesting and point it out” (04:02).

2. Matt Levine Reflects on Experiencing the Crisis Inside Goldman Sachs

(04:51–08:12)

• Levine recounts being at Goldman when Lehman Brothers failed:

  • “I woke up and I looked at my phone… and I saw that Lehman had filed. And I was stunned.” (05:05)
  • Describes the eerie disconnect between Wall Street panic and public calm: “I went outside to get coffee, and everyone was walking around being completely normal. And I had the thought of, like, what? Like, do you not understand that the world just ended?” (05:15)
  • Life at his trading desk became a prolonged period of nothing: “We did not do a deal for six or nine months… I spent six months doing nothing. And I did not take long lunches or have vacation. I just sat at my desk and panicked.” (06:30)

• On Wall Street’s reputation:

  • Levine shares that the widespread hate for Goldman had a strange, unifying effect: “There was a sense that it was a little bit cool to be at a place that everyone hated so much.” (07:41)

3. “Status Revolution” on Wall Street and the Shift of Risk

(08:12–12:20); (15:04–17:03)

• The 2008 crisis caused a seismic shift in who takes risk and earns prestige in finance:

  • Hedge funds, private credit, and high-frequency trading shops have replaced banks as risk-takers.
  • Regulatory pressure and new rules post-crisis have made banks less leveraged and more cautious.
  • Levine: “The prestige locations on Wall Street have shifted… hedge funds, asset managers, high-frequency trading firms. These are all places that are kind of like closer to the center of the action because they can take more risk.” (09:54)

• Michael Lewis underlines the logic: “Because the risk gets socialized if they screw it up.” (10:46)

• Levine’s evolving perspective: “As I get older, I become more sympathetic to the regulatory changes… They’re so levered… If you get anything wrong, you vanish and you leave a crater in the market.” (10:49, 11:08)

Notable insight:

• The financial system may be less prone to collapse now because “there is less of that short term financing against like whatever people are up to.” (12:13)

4. The Rise of Bitcoin as a Crisis Legacy

(17:58–23:04)

• Lewis asks if Bitcoin is the most significant financial consequence of the crisis.

• Levine explains Bitcoin’s origin as a direct response to 2008:

  • “The bitcoin white paper references the financial crisis, that it seems like Satoshi Nakamoto was upset by the leverage in the banking system and by the socialization of losses…” (18:13)
  • Crypto’s countercultural appeal is rooted in post-2008 mistrust, but the space quickly replicated the same risky qualities of the old system.
  • “One of the many ironies of crypto is that it seems to be born out of mistrust of institutions… and then it goes and recreates institutions and intermediaries and requires even more trust than the thing that it’s replacing.” – Michael Lewis (19:27)

• On the “crypto crisis”: Levine draws parallels between the collapse of FTX and the 2008 bank failures:

  • “The crypto winter… really recreates 2008. Like, really like beat for beat is like this is what happens when you over lever something… there's no regulation and there’s a lot of non transparency…” (20:03)

• Key difference: No government backstop like in 2008; instead, for a while there was FTX, the Sam Bankman-Fried “lender of last resort” in the crypto world. (21:26)

• Crypto’s risk to the broader economy remains low… for now:

  • “All of crypto could go to zero and nothing outside of crypto would be affected by that.” – Matt Levine (22:02)
  • “Crypto people are working very, very hard to change that… the more you integrate it into the financial system, the better your odds of getting a bailout if something goes wrong.” (22:21)

5. Lessons Learned (or Not) From the Crisis

(26:21–30:57)

• Levine’s core diagnosis:

  • “It’s short term, information-insensitive leverage on stuff that you think is safe is the dangerous thing, right?” (26:29)
  • Banks fund safe-seeming, long-term assets (e.g., AAA mortgages) with short-term loans or deposits. When confidence vanishes, this creates a fast-moving financial firestorm.
  • “Runnable short term debt is the thing that causes financial crises. Can people take their money out? It’s not the asset side… what’s bad is that, you know, there’s mark-to-market losses and you have short term funding and you get blown up.” (28:24)

• Regulators have responded by requiring more stable, longer-term funding for banks, but other sectors (e.g., crypto, regional banks) repeat old mistakes.

6. Where’s the Next Potential Crisis?

(29:50–31:04)

• Levine hesitates to “crisis-monger,” but flags the giant, multi-strategy hedge funds:
  • “They do a lot of the businesses that banks used to do. They’re very levered… They are the places that train up the best risk takers.” (29:53)
  • Implies that risk has simply migrated, not disappeared.

7. Broader Social and Political Impacts

(31:04–32:21)

• The crisis eroded big banks’ public standing and enabled more aggressive regulation and reforms, e.g., creation of the Consumer Financial Protection Bureau.
  • “The big banks lost status. Now you can go to Congress and say banks should not be able to charge overdraft fees. And everyone’s like, oh yeah, those banks, they suck.” (31:04)
  • He claims the overlap between the CFPB’s mission and the 2008 crisis is limited: it emerged more from public anger at banks than direct causation.

8. Stablecoins, Narrow Banking—Future of Money?

(32:28–36:42)

• The rise of stablecoins is, in Levine's eyes, a sign of continued mistrust of banks—an attitude seeded by 2008.

  • “Stablecoins are sort of a way to take risk out of the financial system… Instead of having your money at a bank which could invest it in weird stuff, you have your money in this thing … invested in treasury bills.” (32:28)
  • Banking is fragmenting: risky lending is now done by long-term funded entities (private credit), while “safe” money is crowding into money market funds and stablecoins.

• This shift could be existential for smaller, regional banks, threatening their core business model.

• Lewis asks, “Can you imagine a world where there are no banks?” (35:28)

  • Levine: This is plausible in theory (stablecoins, direct accounts with the Fed, private lenders for mortgages)—but the transition would be hugely disruptive.
  • “If that happens… the financial crisis would be the great catalyst for it.” (36:42)
  • He traces the lineage: “Stablecoins grow out of bitcoin, right? Bitcoin grows out of the financial crisis, right? The great flourishing of mistrust in the financial system can lead to a lot of consequences.” (36:42)

Notable Quotes and Memorable Moments

• “I can just read Matt Levine. And he cares so much more about it than I do. … He makes me care about it.” – Michael Lewis (04:01)
• “Do you not understand that the world just ended?” – Matt Levine on public obliviousness during Lehman collapse (05:15)
• “There was a sense that it was a little bit cool to be at a place that everyone hated so much.” – Levine, on the odd camaraderie at Goldman (07:41)
• “The prestige locations on Wall Street have shifted… hedge funds, asset managers, high-frequency trading firms.” – Matt Levine (09:54)
• “One of the many ironies of crypto is that it seems to be born out of mistrust of institutions… and then it goes and recreates institutions and intermediaries and requires even more trust than the thing that it’s replacing.” – Michael Lewis (19:27)
• “Runnable short term debt is the thing that causes financial crises… It’s not the asset side.” – Matt Levine (28:24)
• “Can you imagine a world where there are no banks?” – Michael Lewis (35:28)
• “The banking system for so long was this sort of sleight of hand: we take deposits that you think are super safe and we use them to make risky investments. And if that’s going away, then it’s an existential crisis for some number of banks.” – Matt Levine (33:57)

Important Segment Timestamps

• 02:21 — Introduction to episode’s focus: consequences of the 2008 crisis
• 04:51–08:12 — Matt Levine on living through the crisis inside Goldman Sachs
• 08:12–12:20 — How Wall Street’s risk shifted from banks to hedge funds and private credit
• 15:04–17:03 — Regulatory side effects and the rise of “shadow banks”
• 17:58–23:04 — Bitcoin and crypto as responses to the crisis; their irony and risks
• 26:21–30:57 — Lessons learned (short-term funding, regulatory response, repeating mistakes)
• 32:28–36:42 — Stablecoins, narrow banking, and speculation about a world without banks

Tone and Language

The conversation is candid, self-aware, occasionally wry, and rich with firsthand anecdotes, drawing on Matt Levine’s mix of finance-insider experience and journalistic detachment. Lewis balances accessibility with specificity, ensuring complex concepts are explained clearly while honoring the technical nuances of financial history and policy.

For Further Exploration

• The next episode will explore how the financial crisis shaped political careers and the broader political landscape.
• To revisit the origins and narratives discussed, check out The Big Short audiobook, narrated by Michael Lewis, on major platforms or Pushkin.fm.

This summary provides a comprehensive guide to the episode’s substance, making it accessible and valuable—even for those who haven’t listened.