Lender of Last Resort

Summary

Against the Rules: The Big Short Companion

Episode: Lender of Last Resort

Release Date: November 4, 2025
Host: Michael Lewis & Lidia Jean Kott
Guest: Emmy Nakamura (UC Berkeley economist)

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Episode Overview

This episode takes a deep, accessible dive into the secretive and pivotal institution at the heart of American finance: the Federal Reserve, commonly known as "the Fed." Host Michael Lewis, alongside co-host Lidia Jean Kott, seeks to demystify the Fed—its origins, functions, crises, and current threats to its independence—through an engaging conversation with renowned monetary economist Emmy Nakamura. Rather than focusing on Wall Street personalities, the show examines how the Fed shaped the response to the 2008 crisis and its impact on today’s economic landscape.

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Key Discussion Points and Insights

1. Why Focus on the Federal Reserve?

• Purpose: To educate listeners about what the Federal Reserve is, why it matters, and why its independence is under threat today.
• Current Relevance: Points to news that the Trump White House wants to control the Fed, with big implications for U.S. and global stability.
• Accessibility: Aimed both at listeners who know "nothing" and those who want a deeper (but still clear) look into the Fed.

"The financial crisis is just an excellent opportunity to teach people what the hell the Federal Reserve is, where it came from, why we have it, why it matters, that it might be in jeopardy right now."
— Michael Lewis (03:34)

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2. The Origins of the Federal Reserve (05:02-11:31)

• Birth and Motivation (05:08)

  • Founded in 1913 in response to repeated banking crises (e.g., 12 crises in the prior century, culminating with a major panic in 1907).
  • Designed to provide stability, so crises wouldn't rely on private figures like J.P. Morgan to "save the day."

• Pre-Fed Chaos:

  • Free banking era: Many banks issued their own money, requiring everyone (even grocers!) to be amateur currency analysts.
  • Money’s connection to gold caused frequent instability; debasement of gold coins was common.
  • Interest rates spiked seasonally (e.g., harvest season) due to fixed money supply.

  "If I'm the grocery store, I actually have to be a bank analyst, because I'm taking paper that was printed by this bank."
  — Michael Lewis (07:48)

• Initial Mission:

  • To provide “elastic currency,” meaning the supply of money could expand or contract with economic needs (e.g., harvests).

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3. The Fed’s Role and Gold Standard Ambiguities (11:02-16:40)

• Gold Standard Complications:
  • Even after creation, the Fed operated on the gold standard until Roosevelt.
  • Balancing act between providing enough money and maintaining gold reserves, with crises when the balance broke.
• Great Depression Test:
  • Fed’s inflexibility and fear of gold outflows exacerbated the Depression.
  • “Half of all the banks in the United States failed.” (14:00)
  • The Fed was still learning its role; wasn’t yet a central economic manager.

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4. Evolving Independence & Power: The Volcker Revolution (18:49-27:13)

• Fed-Treasury Accord of 1951: (19:41)

  • Agreement formalizing Fed’s independence to manage interest rates, balancing government borrowing needs and inflation control.

• Nixon Era Pressure (1970s): (19:53)

  • Recorded evidence of Nixon demanding lower rates for political benefit.

• Paul Volcker (late 1970s/early 1980s):

  • Appointed by Carter amid crisis-level inflation.
  • Volcker insisted on crushing inflation quickly, raising short-term rates to ~20%—wildly unpopular, but ultimately effective.
  • Set the norm for Fed independence; politicians appoint the chair but don’t direct monetary policy.

  "[Volcker] goes home and tells his wife, ‘I don’t think I got the job,’ because... no politician’s going to let him do it. And then amazingly he gets the job."
  — Michael Lewis/Emmy Nakamura (21:02)

• Inflation Psychology:

  • People tolerate ~2% annual inflation, but much higher becomes politically volatile.
  • Acceptance of Fed independence rooted in desire for long-term, rather than short-term, prosperity.

• Norms vs. Laws:

  • Independence persists by tradition and expectation, not strict prohibition; political pressures are always in the background.

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5. The Fed as “High Priest”: From Volcker to 2008 (27:13-28:37)

• Post-Volcker:
  • The Fed Chair personifies economic integrity—“the head of the Fed who everybody is looking to as a kind of priest, the priest of money.” (27:32)
• Limits of Independence:
  • In practice, chairs like Greenspan had to mediate congressional and White House expectations.
  • The Fed is insulated but not isolated from politics.

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6. The 2008 Financial Crisis: The Fed’s Crucible (31:03-48:14)

• Players and Prelude:

  • Ben Bernanke, expert on the Great Depression, is chairman.
  • Asset bubbles burst—especially in housing—but initial Fed stance is dismissive.
  • Bernanke sought to save Main Street, not Wall Street, but recognized the two were inseparable.

  “What happens on Wall street matters to Main Street.”
  — Ben Bernanke via Michael Lewis (33:09)

• Crisis Unfolds:

  • Bear Stearns and Lehman Brothers:
    • Fed intervened to save Bear Stearns but not Lehman, sparking widespread panic.
    • Moral hazard: If banks know they might get bailed out, risky behavior increases.
  • After Lehman’s collapse, credit markets seized—even blue-chip companies like GE couldn’t borrow for essentials.

• Counterfactual: No Fed?

  • Nakamura argues much wider catastrophe—potential 20% unemployment, economic freeze, “another Great Depression.” (39:24-39:38)

  "My baseline starting point is the Great Depression when half of [banks] failed... You could have had 20% unemployment."
  — Emmy Nakamura (39:24)

• Fed’s Actions & Risk to Its Independence:

  • The scope of intervention expanded greatly:
    • Previously, the Fed’s “balance sheet”—the assets it would accept in return for money—was almost exclusively government debt.
    • In 2008, Fed began accepting “other things,” like mortgage-backed securities.
  • This meant the Fed was, in a sense, picking winners and losers, which became politically charged.

  "Now it will accept other things...they’re starting to loan again asset backed securities. So in particular mortgage backed securities."
  — Emmy Nakamura (41:53)

• Public Anger & Policy Communication:

  • Bernanke tried unprecedented transparency (e.g., 60 Minutes interview) to explain to Americans why bailing out banks was necessary.

  "If you have a neighbor who smokes in bed and he's a risk to everybody, and suppose he sets fire to his house...if your house is made of wood and it's right next door...That's where we are now."
  — Ben Bernanke on 60 Minutes, quoted by Michael Lewis (43:36)

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7. Aftermath: Unprecedented Power, Perpetual Controversy (46:07–47:45)

• Expanded Mission & Power:

  • The role of the Fed now includes routine crisis intervention, not just money supply management.
  • Its reach, tools, and the assets it manages have multiplied.

• Independence Threatened:

  • Political attempts to seize control or undermine confidence pose existential risk.
  • Trust in the Fed enables the U.S. to borrow cheaply and maintain financial stability.
    • Lose that, and America’s global financial standing could collapse.

• The Faith Factor:

  • Fed’s credibility shapes market behavior; if markets expect the Fed to control inflation, borrowing costs stay low (47:35).
  • This "trust" is fragile and can evaporate fast.

  "There's enormous value in the trust in this institution."
  — Michael Lewis (47:41)

• Contemporary Anxiety:

  • Emmy Nakamura calls this “one of the most frightening times for Fed independence” since the Nixon or Volcker eras.
  • The stakes are much higher now, with the Fed’s powers far broader and its actions more visible.
  • The U.S. government's unique ability to borrow at low rates depends on global trust in the Fed (48:14).

  "We would lose that luxury if people cease to trust the Fed."
  — Michael Lewis (48:35)

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8. Where’s the Gold? The Quirks and Relics of the Fed (40:36–41:36)

• The Fed still holds large gold reserves in New York (which you can visit on the “gold tour”) but this is a vestige with little operational relevance today.

  "[The Fed] still has some gold from back in the day...you can go on the gold tour. They have special titanium shoes that you wear when you’re holding a gold bar, because if you drop a gold bar on your foot, you’ll break your toes."
  — Emmy Nakamura (40:36–41:06)

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Notable Quotes and Memorable Moments

| Timestamp | Speaker | Quote | |-----------|---------|-------| | 03:34 | Michael Lewis | "The financial crisis is just an excellent opportunity to teach people what the hell the Federal Reserve is, where it came from, why we have it, why it matters, that it might be in jeopardy right now." | | 07:48 | Michael Lewis | "If I'm the grocery store, I actually have to be a bank analyst, because I'm taking paper that was printed by this bank." | | 21:02 | Michael Lewis | "[Volcker] goes home and tells his wife, ‘I don’t think I got the job,’ because... no politician’s going to let him do it. And then amazingly he gets the job." | | 33:09 | Ben Bernanke | “What happens on Wall street matters to Main Street.” | | 39:24 | Emmy Nakamura | "My baseline starting point is the Great Depression when half of [banks] failed... You could have had 20% unemployment." | | 41:06 | Emmy Nakamura | "They have special titanium shoes that you wear when you’re holding a gold bar, because if you drop a gold bar on your foot, you’ll break your toes." | | 43:36 | Ben Bernanke | "If you have a neighbor who smokes in bed and he's a risk to everybody, and suppose he sets fire to his house...if your house is made of wood and it's right next door...That's where we are now." | | 47:41 | Michael Lewis | "There's enormous value in the trust in this institution." | | 48:35 | Michael Lewis | "We would lose that luxury if people cease to trust the Fed." | | 49:10 | Emmy Nakamura | "I hope so." (on odds of the Fed remaining independent after the Trump years) |

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Timestamps for Key Segments

• 04:40 – Start of main interview with economist Emmy Nakamura
• 05:02 – 11:31 – Origins and role of the Federal Reserve
• 15:11-16:40 – The Fed’s missteps in the Great Depression
• 19:41 – 22:19 – The Fed’s postwar evolution and inflation fight
• 27:13 – 28:37 – The “high priest” era and real-world political pressures
• 31:03 – 39:38 – How the Fed navigated the 2008 financial crisis
• 39:38 – 46:07 – Moral hazards, Bailouts, and the growing power of the Fed
• 46:07 – 48:38 – The Fed’s contemporary power and threats to its independence
• 48:38 – End – Final reflections on trust, power, and the Fed’s uncertain future

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Final Thoughts

This episode delivers a masterclass on the Federal Reserve, blending sharp historical insight with plainspoken explanations of complex topics. Michael Lewis and Emmy Nakamura chart the evolution of the Fed from its crisis-born roots to its present-day status as "lender of last resort" and bedrock of American and global finance. The conversation excels at illustrating why the institution matters, why its independence is vital, and why it’s again in the political crosshairs—a theme with urgent contemporary relevance.

This summary offers a roadmap for anyone seeking to understand the powerful, mysterious institution at the center of modern economic life—why we trust it, why we fear for its future, and what happens if that trust disappears.

Transcript

[Emmy Nakamura]

This is an iHeart podcast.

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[Michael Lewis]

Pushkin.

[Lydia Jean Cott]

I'm Lydia Jean Cott.

[Michael Lewis]

And I'm Michael Lewis.

[Lydia Jean Cott]

This is the Big Short companion series on against the Rules. So in the last couple of episodes we talked to people who were in the book and this episode's going to be kind of different because it's actually about an institution, the Federal Reserve. In 2008, the chairman of the Fed was an economist called Ben Bernanke. And there's a clip of him from your new audiobook of the Big Short.

[Michael Lewis]

Chairman Bernanke, the floor is yours.

[Ben Bernanke]

At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained.

[Michael Lewis]

Chapter seven, the Great Treasure Hunt.

[Ben Bernanke]

We will continue to monitor this situation closely.

[Lydia Jean Cott]

That's Ben Bernanke of the Fed. Why are we doing an episode that's about the Federal Reserve?

[Michael Lewis]

The financial crisis is just an excellent opportunity to teach people what the hell the Federal Reserve is, where it came from, why we have it, why it matters, that it might be in jeopardy right now. And there was this person, Emmy Nakamura, who is world class monetary economist, knows more about the Federal Reserve and monetary policy than like most anybody walking the planet who, you know, lives around the corner from me. And I just thought like, sit down with Emmy and answer questions I have about it.

[Lydia Jean Cott]

I liked this episode because I went into it not knowing anything about the Federal Reserve and kind of feeling like I'm too far behind. I'll never know.

[Michael Lewis]

Well, I mean, I feel that way sometimes.

[Lydia Jean Cott]

That's what was nice about it, is that you actually had questions like, it seemed like you were learning too, about the Federal Reserve. So that made me feel like there's not something wrong with me for not fully understanding it. And it's possible to understand it.

[Michael Lewis]

I mean, do you feel better having understood it a bit more, or do you feel like, oh, you learned about it and that was an hour of your life you can't get back?

[Lydia Jean Cott]

No, I think it's good that I know about it for sure.

[Michael Lewis]

I mean, it is in the news right now. It is a huge deal that the Trump White House wants to take control of the Federal Reserve and make decisions about monetary policy that were previously made or currently made by nonpartisan experts. And the presence of an independent Federal Reserve in the financial crisis was critical to resolving the crisis. It was critical to restoring any kind of trust in the system so that they're fiddling with that institution now and threatening the trust. It has such big implications. I think that, like, our culture should just understand it better. My hope for the episode is that people like me who have an interest in it and some knowledge about it, but not expert at all, they find it really interesting because you're hearing it explained in plain language and some deeper questions are being answered. But that also people who have no idea what the Federal Reserve does will all of a sudden have a picture in their mind the next time they hear the phrase Federal Reserve Bank.

[Lydia Jean Cott]

All right, let's get into it. Here is Michael Lewis conversation with Emi Nakamura, an economist at UC Berkeley and an expert on all things Fed, including where they keep our gold, which apparently they still have some of.

[Michael Lewis]

Quite a bit.

[Lydia Jean Cott]

Quite a bit. And if you listen, you can know where to find.

[Michael Lewis]

I began my conversation with the economist Emi Nakamura by asking her when the Fed got created.

[Emmy Nakamura]

So the Fed is a fairly modern invention as things go. It was created in 1913, and I think the proximate cause of why the Fed was created was banking crises. So in the previous century, there had been something like 12 banking crises. Basically, these banking crises were happening all.

[Michael Lewis]

The time with banks failing.

[Emmy Nakamura]

That's right, banks failing. Banking crisis is more than just one bank failing. It's lots of banks failing. And there was particularly bad one in 1907 where lots of banks failed. And the banking crisis didn't end until John Pierpont Morgan put in his own money to try to end this Banking crisis. And at that point, the story goes that people sort of realized that something had to be done so that you didn't have to depend on John Pierpont Morgan to come in and be Superman and save the day.

[Michael Lewis]

And was this. So this was in the United States. Did any version of the Federal Reserve exist outside the United States?

[Emmy Nakamura]

Yes. So in some other countries, for example, in England, there were central banks for a much longer period of time. The US Was relatively late to the game. This is probably connected partly to this sort of fear of government and centralized institutions and centralized power that's been around in the United States for a long time. There are prominent figures in the United States like Andrew Jackson, who actually attacked some of the earlier attempts to create a Fed. But the original reason why central banks were created in other countries, and this is going to become part of the Fed story also later on, was to finance the government.

[Michael Lewis]

So if you want to lend money to the government.

[Emmy Nakamura]

Exactly. So you have to have someone like the bank of England, for example, the government needed to borrow money, for example, for wars and other purposes. And then someone has to oversee that.

[Michael Lewis]

So let's explain what this thing is that gets created in 1913 is like a central bank. We throw that word or that phrase around, but what is it? What is it doing in 1913?

[Emmy Nakamura]

So the most basic thing was to create a system for issuing money. So in the so called free banking era, which was some time before, when.

[Michael Lewis]

There is no central bank, no central bank, just a bunch of banks, private banks owned by people.

[Emmy Nakamura]

Yes, but there was paper money. But the thing about paper money is that inherently the paper is not worth very much. So the whole point of the paper is it's something that you're expecting someone else to be willing to take. But in the era of free banking, there are all these individual banks that were offering this paper money, their own paper money. That's right. And literally if you went to try to buy something, grocery store or whatever, they'd have to kind of think about how valuable is this piece of paper you're handing me as opposed to some other piece of paper. So that's obviously very inconvenient.

[Michael Lewis]

So if I'm the grocery store, I actually have to be a bank analyst.

[Emmy Nakamura]

That's right.

[Michael Lewis]

Because I'm taking paper that was printed by this bank.

[Emmy Nakamura]

That's right.

[Michael Lewis]

Is sound. What is it backed by? Is it backed by gold?

[Emmy Nakamura]

Gold. Gold.

[Michael Lewis]

So I have to believe that I take Joe Schmo's bank's notes to Joe Schmo. He'll give me gold of this value for it.

[Emmy Nakamura]

That's right. And it's also really crucial that everybody at that bank believes, because otherwise they start going to the bank and trying to take out their money and then the bank actually does fail, which is what was causing all of these banking crises. So this was a situation in the free banking era. During this whole period we're on the gold standard. So it's a sit. You know, there's, there's sort of some rate at which paper money can be exchanged for gold. But even before that, there is a period of time when people were literally using gold in transactions. And during that period of time, the big problem is just the gold is very heavy. People have a tendency. So. So I talked about paper money and how you had to check whether the paper money was really worthwhile. But that was actually even true with gold. If someone gives you a gold coin, it might have been that they've shaved off a little piece of it and it's actually not worth as much as it's supposed to be. And that was something that was always happening.

[Michael Lewis]

That's a scale with you when you're doing a transact to make sure the gold weighs what it's supposed to weigh.

[Emmy Nakamura]

That's right. And this was called the debasement of currency. So this was always happening. And then there was the fact that during the gold standard era, if you had a ship which was filled with gold and it sank, that gold was just gone. So that meant that now the whole economy had to function on less money. So there was literally less money to buy all the stuff you wanted to buy. So I think in the modern world, we never really worry about having enough money to buy stuff. That's not a concern. But in the early, in this era you really did. And another example of this was actually that interest rates before the founding of the Fed, they actually went up during the harvest season. And the reason was the farmers needed a lot of money to transact during the harvest season. And because there was no Federal Reserve, there was basically a fixed quantity of money. And when more people, more the farmers wanted to.

[Michael Lewis]

There's more transactions, there's more demand for the money. Exactly. And causes the interest rates to rise.

[Emmy Nakamura]

Exactly, exactly. So it was actually seasonal. So one of the early reasons, aside from dealing with the banking panics, that was used for why you had to have the founding of the Federal Reserve was what they called a more elastic currency. Elastic in the sense of an elastic ban, means that when people want more money, then the Fed provides more Money. So that was one of the earliest functions. And even just in terms of the seasons of the year, there's some times of year when people want more money.

[Michael Lewis]

But we don't get to this till 1913.

[Emmy Nakamura]

That's right.

[Michael Lewis]

So you're saying this country operated for 150 years, basically with this money problem.

[Emmy Nakamura]

That's right.

[Michael Lewis]

And everybody just lived with it.

[Emmy Nakamura]

Lived with it, but in various ways, poorly. I mean, there were a lot of banking crises. We've seen one serious banking crisis in the United States since the Great Depression. Imagine if that was happening all the time.

[Michael Lewis]

Right? So the thing that gets created in 1913, what does it explain to me? So I really understand it, what it's doing. Like, okay, it's a building somewhere with some people in it who have some relationship to all the banks in the country. What is that relationship?

[Emmy Nakamura]

Well, it's willing to provide money. So a basic situation is. So we talked about the case of the harvest. So suppose interest rates are rising because people want to use more money, but there's no more gold. So if you had a very strict kind of system of the ratio between the amount of money and the amount of gold, then interest rates are going to rise. But in this case, the central bank is going to say, no, we're just going to provide more money, so we're not going to.

[Michael Lewis]

Does that mean we abandon the gold standard?

[Emmy Nakamura]

So the gold standard is a very complicated concept. Okay. The most basic idea in the gold standard is that you will exchange $1 bill for a certain amount of gold. And that's how people usually refer to what it means to be on a gold standard. And that was true before and after the founding of the Fed, until Roosevelt went off gold.

[Michael Lewis]

But how, if they can just print money whenever in 19, after they've created this bank, how can they maintain the same price of gold? More paper for the same amount of gold means the gold should be.

[Emmy Nakamura]

So did you know that today you actually cannot go to the Fed and ask for gold?

[Michael Lewis]

I did know that.

[Emmy Nakamura]

So it turns out that money is something that has value in and of itself, even if you can't exchange it for gold. So it's not entirely such a strict relationship. And there are these two things on the gold standard. One is that there's this fixed exchange rate of money for gold. But the second is this idea of a gold cover ratio, that you're actually holding some real asset to return for any paper money that you're given. But the second part, like, how much real assets do you have to hold for each dollar that doesn't have to be so inflexible. This is something that can vary over time. And in practice, all of the countries central banks who were running a gold standard during this period of time, their gold cover ratio would vary over time.

[Michael Lewis]

But the gold price wouldn't change.

[Emmy Nakamura]

That's right.

[Michael Lewis]

That's what it meant to be on the contract. So after the central bank is created, the Federal Reserve is created in 1913, I could still go in with my dollars and get gold at the same price. So even though they'd printed dollars, at what point, who's the first person to point out that, oh, maybe they don't have enough gold for all the dollars?

[Emmy Nakamura]

So those are called runs. And that happened pretty substantially in the early stages of the Great Depression. So all of a sudden you had this situation where people started to show up at banks and ask for their money back, and the Federal Reserve did not provide that money. And, you know, something like half of all the banks in the United States failed. And you could ask why? And there you do end up coming back to the gold standard. Because the fundamental fear that the US Federal Reserve had at the time was that itself, it itself would face a.

[Michael Lewis]

Run, the government did not have enough gold, and everybody would know it. And so there'd be a race to get their gold out before it was gone.

[Emmy Nakamura]

Exactly. And today there's an academic debate on how constraining that really was. I mean, the Fed in the early 1930s actually had a pretty decent amount of gold. So perhaps they could have withstood the pressure, but they didn't think they could, or they certainly worried about it. And so that had a real impact on interest rates and on the extent to which they were willing to provide money to banks during this period. And it ended up with just a huge amount of banks failing and a complete breakdown of the financial system.

[Michael Lewis]

So this thing gets created in 1913. It isn't really tested until 1929. Yeah. And in their 30s, the Federal Reserve is supposed to come in and prevent depressions on the back of banking crises. It doesn't do it. The depression happens like half the GNP was lost. You know, it was economically catastrophic.

[Emmy Nakamura]

Right.

[Michael Lewis]

Unemployment of whatever, 30%. So explain what they did in that period.

[Emmy Nakamura]

So I think the first thing to say is that the Fed actually had a hand in the onset of the Great Depression in the sense that, you know, stock markets were really booming in the late 20s and the Fed actually raised interest rates. So that's, that's the first thing. So, so The Fed thought that, you know, that there was too much speculation on Wall street and so on. They raised interest rates.

[Michael Lewis]

But people, the speculation in particular, people were borrowing money to buy stocks.

[Emmy Nakamura]

Right.

[Michael Lewis]

And it made them upset.

[Emmy Nakamura]

Right.

[Michael Lewis]

And so they said, we're going to, we're going to try to stop that activity because it's creating this boom in the stock market.

[Emmy Nakamura]

So then they raise interest rates and of course it does lead to a slowdown in the economy. But banks start to fail. And once the banks start to fail, there's, there's a panic. At this point in time, there's no deposit insurance. So you really did have to worry that if you had your money in.

[Michael Lewis]

A bank, you're never gonna see it again.

[Emmy Nakamura]

Exactly. So then what happens is that people start withdrawing their money from the banks and there's this thing that, you know, all the money that's out there is actually much more than just the cash or the gold. There's this idea of the money multiplier that if you put your money in a, and then they lend out 90% of it, that creates a lot more money. But then when they take the money out of the bank, it means that.

[Michael Lewis]

It'S a reverse effect.

[Emmy Nakamura]

Exactly. And of course some of the money that's being created is deposited in other banks. And so there's this chain reaction where the banks start to fail. But at this point in time, the Fed doesn't see itself as an institution that was designed to manage the economy in the same way that it does today.

[Michael Lewis]

It didn't.

[Emmy Nakamura]

The Fed was really still learning its job.

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[Michael Lewis]

I'm back with the economist Emmy Nakamura talking about the surprisingly dramatic history of the Federal Reserve.

[Emmy Nakamura]

At many points in the history of central banks, they've played this role of raising money for the government and in the United States. This is one of the things the Fed was doing during the Korean War. And there was some tension between the Fed and the treasury during this period of time because the Fed was starting to get concerned about inflation. And of course, the treasury wanted to borrow more money to finance the war. Exactly. And so, partly out of this antagonism, there was this Fed treasury accord in which there was an agreement that the Fed was going to be able to manage interest rates to sort of support the economy, but also to manage inflation. And that Fed treasury accord is typically viewed as the start of modern monetary policy.

[Michael Lewis]

When exactly was that?

[Emmy Nakamura]

1951.

[Michael Lewis]

And so the Fed now is going to be granted some independence and it's going to manage interest rates. That's going to be the thing it does which is effectively managing money. So it's a price of money.

[Emmy Nakamura]

Right. The next major event that happens is in the 1970s and early 1980s. So the early 1970s are the time period of the most explicit political pressure on the Fed. So this is a time when you have Nixon as president and you have Arthur Burns as chair of the Fed. And we now know, based on tapes and so on of their conversations, that there was a lot of political pressure.

[Michael Lewis]

Nixon screaming at him to lower interest rates.

[Emmy Nakamura]

Exactly. And then, you know, fast forward he does. Absolutely fast forward, you know, several years, and inflation is really, really high. And what we see is that people actually hate high inflation. And then this amazing thing happens that you have Paul Volcker, who gets to interview for the job of chairman of the Fed. And in his interview, he explains what he's going to do. He says, I don't think gradualism really works. I don't think it's going to work. To just raise interest rates a little bit. I think we're going to have to go all out and raise interest rates dramatically. So then he goes home and he tells his, you know, his wife, I don't think I got the job because.

[Michael Lewis]

No politician's gonna let him do it.

[Emmy Nakamura]

Exactly. And then amazingly he gets the job.

[Michael Lewis]

Who gives him the job?

[Emmy Nakamura]

Carter. Carter gives him the job and then loses. It's very brave, probably over this.

[Michael Lewis]

So it's an incredibly brave and self sacrificing thing to have done.

[Emmy Nakamura]

Yes, but inflation was also really unpopular. So I think that's something that maybe I didn't have a sense of in the politics of until I saw the inflation during COVID People really hate inflation.

[Michael Lewis]

So let me stop you there because people hate inflation above a certain number.

[Emmy Nakamura]

Yes.

[Michael Lewis]

They completely fine with steady small inflation. So what's the number?

[Emmy Nakamura]

I think this is something we've been learning about. So right now the Fed tries to target 2% inflation.

[Michael Lewis]

And we all say that's fine.

[Emmy Nakamura]

That's right.

[Michael Lewis]

But if it gets to be 5%, we all get furious.

[Emmy Nakamura]

Right. And the question of where that line is is not something we have scientific evidence on.

[Michael Lewis]

It's psychological matter.

[Emmy Nakamura]

It's absolutely psychological. And right now inflation is, you know, closer to 3%. And so there's this obvious question, maybe we should just leave it at 3%. And then the question is, how angry does 3% inflation make it? And if you talk to people who are a little bit older, remember the period of the 1980s and so on, they'll say people were fine with 3% inflation. But then on the other hand, from the perspective of the Fed, there's this whole slippery slope issue that if we go from two to three, who knows.

[Michael Lewis]

We acclimate them to three, then all of a sudden they'll be okay with four.

[Emmy Nakamura]

Exactly.

[Michael Lewis]

Yeah. Okay, but that's interesting, right? It's like it isn't that, but people hate inflation. People actually kind of secretly like inflation in small amounts below 2%.

[Emmy Nakamura]

We mostly just don't think about inflation.

[Michael Lewis]

Yes. All right, so Jimmy Carter appoints Paul Volcker to be the head of the Fed in a period of high inflation in which everybody's angry about the inflation.

[Ben Bernanke]

Yes.

[Michael Lewis]

And what does he do?

[Emmy Nakamura]

He raises interest rates to something close to 20%.

[Michael Lewis]

Short term rates.

[Emmy Nakamura]

That's right.

[Michael Lewis]

And, and how does he do that politically? Like how does he even pull that off?

[Emmy Nakamura]

It is extremely unpopular.

[Michael Lewis]

Can you imagine someone doing that right now? If we woke up tomorrow morning and all of a sudden the Fed rate was 20%. So your credit card rate was 40% or whatever it was 30% or whatever it would be. I mean, it'd be cataclysmic for people.

[Emmy Nakamura]

What's amazing is that he didn't get fired.

[Michael Lewis]

It sounds like it's almost more of a norm shift than a legal shift.

[Emmy Nakamura]

I think that's right.

[Michael Lewis]

So the institution is the institution, but the norms around the institution are changing. We've realized that we kind of need it to be independent for all of us to be. To prosper.

[Emmy Nakamura]

That's right. And in so many of our institutions, there's this complicated relationship between norms and rules. So this is one of the most important ideas in monetary economics, that if politicians have short horizons, they don't have very long until they need to get elected again. And in this short period of time, they want to boost the economy. But on the other hand, if you have a really high inflation period like the United states did around 1980, and people start to expect this high inflation and they build it into wage contracts and all kinds of things, it can take a decade to bring inflation down. And so that's something that's mostly going to affect a lot of future politicians. So there's always this tension. And any country that you read about with central banking, this tension is sort of front and center. On top of that, the government often also just wants to borrow a lot of money. So that's another reason why the government wants to keep interest rates low. And central bank independence is all about trying to manage that tension.

[Michael Lewis]

I was just thinking back to the time when there were kings. That's right. That a king actually might be quite reasonable about what you do with the money supply, because he's going to pay the price if you lower interest rates and jack up the economy artificially for a couple of years.

[Emmy Nakamura]

And yet monetary policy was terrible during this era. And I attribute that mostly to the fact that they really just had no idea what was going on. So I think for humans, the idea, the idea that you can print pieces of paper in some form and use them as money and this will sort of work out well is just actually a really profound idea that takes people a long time to understand and a long time to manage and a long.

[Michael Lewis]

Time to understand who pays the price if you introduce more of it.

[Emmy Nakamura]

Exactly, exactly. So you look at what happened in France, for example, under various kings, and there were huge amounts of inflation as they created huge amounts of money in various forms. And. And my sense is that a lot of this was about just not really understanding Cause and effect, and I don't blame them. I think this is a really subtle concept. There's this really fascinating example of this island called the island of Yap, in which it was one of the first ledger systems. So there were these large stone coins, but they were not movable. And this was actually the monetary system. It was your ownership of these stone coins. But they were a very large size.

[Michael Lewis]

You couldn't move them around. You couldn't move them around, spend them at the store.

[Emmy Nakamura]

But everybody knew that you owned one. So, in fact, even if one sank to the bottom of the ocean, it didn't matter. You could still own a piece of it. So this was kind of a very early sense.

[Michael Lewis]

What did they transact with.

[Emmy Nakamura]

It was a ledger system. So it was just your ownership in.

[Michael Lewis]

It was like Bitcoin.

[Emmy Nakamura]

Exactly. It was exactly like Bitcoin on the island of Yap. That's great, but it's a subtle idea.

[Michael Lewis]

But were the stones fixed so that you could never introduce a new stone?

[Emmy Nakamura]

So that, I think, is the crucial thing, right, that you couldn't. I don't know what the details were on finding new stones, but they were large objects so that it wasn't easy to create new ones. But later on, you know, you had this difficulty that other societies that came later but weren't as evolved in some sense as the island of Yap, they wanted to have coins that you could actually transact with, that you could carry, that you could pick up. And so that's. That's kind of how we got to gold. You want something that you can't just create new gold, but at the same time, it's small enough that you can transact in it.

[Michael Lewis]

I love this idea that a central bank, the central banks that we now have, are in part just an expression of an evolved understanding of what money is and how it works. And that we had to. There was a lot of trial and error.

[Emmy Nakamura]

Exactly. Exactly.

[Michael Lewis]

All right, so walk me from Volcker. When all of a sudden we have basically the Federal Reserve that we now know, very powerful head of the Fed, who becomes a kind of high priest.

[Emmy Nakamura]

Of money and becomes even more powerful because he raised interest rates and it worked. Inflation fell much more rapidly than anyone expected.

[Michael Lewis]

Yes. So he's a success. Inflicted a lot of pain, but a success. And so from that moment, but we have this character, the head of the Fed, who everybody is looking to as a kind of priest, the priest of money, and who is regarded as outside the reach of politicians. They can appoint him, they can grill him. But they can't tell him what to do with the money supply.

[Emmy Nakamura]

So I think in a way that's an exaggeration because if you read the memoirs of central bankers, like for example, Alan Greenspan, even though you have central bank independence, he's constantly interacting with members of Congress.

[Michael Lewis]

So it's not true to say that the Fed is not a political institution, but it's not a party political institution. What it is is it's managing. It's got to manage its relations with politics.

[Emmy Nakamura]

That's right. And it's more insulated. There's no doubt that it has independence. But to say that it doesn't have to worry about its independence at all is an exaggeration because there are always political pressures. And it's clear that the Fed chairs have never thought that they could just completely ignore those political pressures.

[Michael Lewis]

Is it fair to say that from the moment that Volcker sort of reinvents the role of the head of the Fed, that role is not tested again until the 2008 financial crisis?

[Emmy Nakamura]

Yes, I think that was the biggest test.

[Michael Lewis]

We're going to take a quick break and when we return, Emmy and I will talk about what the Fed decided to do as banks started to collapse in 2008.

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[Michael Lewis]

I'm back with UC Berkeley economist Emmy Nakamura. Describe to me the Fed going into the financial crisis and described to me who the players were, what happened, and what it did in response.

[Emmy Nakamura]

So Ben Bernanke was at the helm of the Federal Reserve going into the financial crisis.

[Michael Lewis]

And who is he?

[Emmy Nakamura]

Ben Bernanke is a scholar who started his career by studying the Great Depression. And then it's this incredible coincidence that he happens to be the person who's chairman of the Fed at the time of the the next big financial crisis in the United States.

[Lydia Jean Cott]

Right.

[Michael Lewis]

Let's quickly describe what this crisis looked like.

[Emmy Nakamura]

So going into the financial crisis, you'd had this enormous real estate boom. House prices in the United States had risen dramatically. This had peaked in 2006. So house prices were kind of on their way down by 2007. But there was a general view, including at the Fed, that this might not be a huge issue for the rest of the economy.

[Michael Lewis]

Houses prices go up, they go down, but it doesn't really affect what, what Americans are doing in their economic lives.

[Emmy Nakamura]

Exactly, exactly. So at the very beginning, there were a few hedge funds that lost some money on real estate backed assets. But the view of the Fed and a lot of other people was that this was going to be something that you could sort of sail through. And so early on, the monetary policy, interest rates were over 5%. It was sort of normal monetary policy. There wasn't at all a sense of sense that this was going to become a sort of historic event for the macro economy as opposed to some elements of the financial system. But then after this sort of benign starting point, you started to see things happening more quickly. And so this is the beginning of when the Fed in some sense starts to gamble its independence. What they're arguing, what Bernanke argues very forcefully, is that, so he says he lived as a child on a street called Main Street. So he says, I don't come from Wall Street, I come from Main Street.

[Ben Bernanke]

You know, I come from Main Street. That's my background. And I've never been on Wall Street. And I care about Wall street for one reason and one reason only, because what happens on Wall street matters to Main Street.

[Emmy Nakamura]

His dad was a pharmacist, you know, all right? And he says the only reason I care about this is because people like my dad will not be able to get a little.

[Michael Lewis]

Where do they end up? What do they do?

[Emmy Nakamura]

They end up at that point in a situation of backstopping a bunch of loans that are made to Bear Stearns. Basically, they take on some of the worst parts of Bear Stearns balance sheet so that they facilitate private sector loans to Bear Stearns and sort of, they allow things to continue in a somewhat orderly manner. So this is something which even at the time, there's a lot of, of skepticism about, because first of all, there's the idea that what is the Fed doing to be bailing out this private sector actor who made a lot of mistakes. And second of all, there's the question, even if it was a good idea in terms of what's happening right now, shouldn't we be worried about what this tells other banks about the risk?

[Michael Lewis]

We'll bail you out too. It's kind of incredible, this step, right? You've got a character chairman of the Federal Reserve, who only relatively recently in the grand sweep of history, has by norm become this kind of God of money and God of finance, picking winners and losers in the economy. So briefly, walk me through the rest of the financial crisis.

[Emmy Nakamura]

I think there's a hope that things will simmer down after this point and maybe for a period of time it looks like they might. But there's still problems being caused by these real estate assets.

[Michael Lewis]

All these banks have made really stupid.

[Emmy Nakamura]

Loans and you can sort of line them up in order of which banks have the most of these.

[Michael Lewis]

Do that for me.

[Emmy Nakamura]

So Lehman is sort of next on the list. And then the question is, with these banks that are at risk because they have a lot of these real estate assets on their balance sheets, which have lost a lot of money, there's a question of what does that bank do? So if there was no one who was going to help them, then a natural thing for them to do would basically be to sell themselves to another bank which had a stronger balance sheet. And actually there are some banks that sell themselves during this period of time. But there's a big pushback against that because there's of course, this hope that maybe the Federal Reserve will step in and help you. And so this is one of the immediate reasons why you start to see what people call moral hazard, that if you think somebody might save you when you go hiking or something like that, if you know that there's a mountain patrol, then you might be a little bit more blase about whether you might go on this tough mountain trail because you really want to go and you think someone will save you. In the event that you kind of get stuck, you might do it. And so this is happening over the summer, that Lehman, for example, clearly has these bad assets on its balance sheet. So Lehman actually becomes insolvent, bankrupt. And then there's this question.

[Michael Lewis]

So Bernanke does not save Lehman Brothers.

[Emmy Nakamura]

Right.

[Michael Lewis]

If he believes it's so important to save these places because of, of what he's learned about the Great Depression, why doesn't he save Lehman Brothers?

[Emmy Nakamura]

So in the aftermath, that's become a big question. And at the time, what Bernanke said was that it was not within the Federal Reserve's purview to do that, that they simply didn't have enough good collateral. I've spoken to various economists after this crisis, including people on the right of the political spectrum, and there are quite a few people who will say that if they had known how bad the financial crisis would be, they would have said that the Fed shouldn't have offered more support.

[Michael Lewis]

So you now have Lehman Brothers fail, then what happens?

[Emmy Nakamura]

So after Lehman Brothers fail, then the whole financial market really starts to freak out. And if you think about the mortgage market, so this is something that affects lots of people, including Ben Bernanke's dad, the pharmacist. If he had been trying to get a loan for his business at the time, that market, all of these asset backed securities that were being used to finance a lot of mortgages, that market is completely falling apart during this period of time.

[Michael Lewis]

So we're in a vicious cycle of mistrust and real problems. I want to stop right there and I want you to imagine for me if from that moment on there is no Federal Reserve, there is no central bank. How do you think it plays out?

[Emmy Nakamura]

I think that a lot of banks would fail.

[Michael Lewis]

Do you think all of them would have failed?

[Emmy Nakamura]

No. I mean, my baseline starting point is the Great Depression when half of them failed. But there were some improvements relative to the Great Depression even without the Federal Reserve. So in particular there's deposit insurance. So that's sort of keeping things a little bit more stable than you would have seen without the Federal Reserve. But there are a lot of sort of non bank, bank like entities that are out there that would have failed and there would have been a lot of fear associated with that. One of the anecdotes that I remember people really thought was scary at the time was General Electric. I think it was trying to get a working capital loan, a working Capital loan is just companies in general, when they want to pay their employees, they often have to borrow money because they have to pay their employees before they get paid for the products that the employees are producing. And so this type of loan is typically quite safe, happens at very low interest rates. But even a company like General Electric was having trouble borrowing money to pay its employees. So this idea that companies have to borrow money, even just to pay their employees, even in the normal course of business, sort of tells you what could have happened in the event that the financial system had sort of started to destruction.

[Michael Lewis]

So if we imagine a world in which this just the irascibility of the American public and this suspicion of centralized power and all the rest had got us to 2000 as far as 2008 rate without a central bank or without a Fed that's got real powers. Just how bad do you think things could have gotten in the economy? What kind of unemployment? What kind of cost to GDP?

[Emmy Nakamura]

I think you could have had 20% unemployment. We had almost 10% unemployment. But you could have had 20% unemployment. You could have had investment sort of almost stopped for a period of time. You'd have had another Great Depression, something like that.

[Michael Lewis]

So Bernanke goes into this with Bear Stearns, eyes open, realizing that he is jeopardizing the independence of the Fed.

[Emmy Nakamura]

Gambling, I would say, gambling, gambling, the.

[Michael Lewis]

Independence of the Fed, because he knows that it's gonna get hot politically when you are picking winners and losers, when you are distorting markets, and when there.

[Emmy Nakamura]

Are always critics of the Fed. So there, if you look at Congress, there are always people who are saying that we should go back to the gold standards. So previously, the Fed pretty narrowly had a balance sheet. So if the Fed is kind of like a bank, it has assets and liabilities. The assets were almost entirely government debt. So I mentioned before, US Government debt is viewed as the safest debt there is.

[Michael Lewis]

Right? Right. So when they print money, they get collateral.

[Emmy Nakamura]

Right?

[Michael Lewis]

Right. And so until 2008, that collateral is Treasuries. Did it used to be gold?

[Emmy Nakamura]

Yes, yes. And in fact, the Fed still has some gold from back in the day.

[Michael Lewis]

When I want money, I have to come for gold, and they give me some money.

[Emmy Nakamura]

And you can actually go to the New York Fed and you can go on the gold tour. You can see the gold. You can see they have gold in little cages from different countries around the world. They have special shoes, special titanium shoes that you wear when you're holding a gold bar. Because if you drop a gold bar on Your foot, you know, you'll break your toes.

[Michael Lewis]

Is that true?

[Emmy Nakamura]

Yes. And they have a scale for measuring, you know, gold in the event of a transaction between two countries, which just means moving one piece of gold from the cage of one country to another country. And they have a person who knows how to use this scale and titanium shoes. But when I visited the New York Fed and went on this gold tour, I asked them when the last transaction had been made. You know, it was like five years, 10 years ago, you know, and the.

[Michael Lewis]

Gold isn't moving around much.

[Emmy Nakamura]

No. So I think, I think, you know, we.

[Michael Lewis]

It's a bit like the stones in Yap, you know.

[Emmy Nakamura]

Absolutely.

[Michael Lewis]

It's a relic.

[Emmy Nakamura]

A relic.

[Michael Lewis]

We went down a rabbit hole there. But it's so back to the 2008 up to this moment. The Fed is accepting Treasuries to get if you want dollars.

[Emmy Nakamura]

Right.

[Michael Lewis]

And now it will accept other things.

[Emmy Nakamura]

That's right.

[Michael Lewis]

What other things?

[Emmy Nakamura]

Well, for example, they're starting to loan again asset backed securities. So in particular mortgage backed securities.

[Michael Lewis]

So we talked about my home mortgage.

[Emmy Nakamura]

That's right. So we talked about the idea that, you know, the US housing market was starting to slow down, peaked in 2006, and there were all of these mortgages. And it's not that the Fed was holding individual mortgages, but the banks had played a big role in repackaging these mortgages into what were called mortgage backed securities. And some of them are guarantees by these quasi governmental at the time, institutions.

[Michael Lewis]

So they're almost like Treasuries.

[Emmy Nakamura]

That's right. But the market wasn't treating things that way at the time. And so that's the sense in which it was a real decision by the Fed to be willing to take these kinds of assets.

[Michael Lewis]

But if I'm the pharmacist on Main street and I'm just watching this from a distance, what it looks like is, oh, these banks made these crappy loans. Now they get to go take those loans to the Fed and the Fed will give them actual dollars for those loans, getting them out of their problem.

[Emmy Nakamura]

Right. And that's not wrong. But what Bren Bernanke said, and this was one of the things he did to try to sort of battle against risking the independence of the Fed was he tried to speak directly to people. So there was this famous moment when he went on 60 Minutes, which was not something that any prior Fed chairman had done, but he wanted to speak directly to the public. And he made the argument that while it looks terrible for the Fed to be Bailing out these banks that lost a lot of money and probably maybe should have known better. On the other hand, if we don't do something about this banking crisis, then you're not going to be able to get a mortgage.

[Ben Bernanke]

Let me give you an analogy. If you have a neighbor who smokes in bed and he's a risk to everybody, and suppose he sets fire to his house, and you might say to yourself, not going to call the fire department, let his house burn down. It's fine with me. But then, of course, what if your house is made of wood and it's right next door to his house? What if the whole town is made of wood? That's where we are now.

[Emmy Nakamura]

It was a very unusual thing that he was making this case directly to the public, but it was really brought on by the fact that the Fed couldn't afford to be a completely technocratic, insular organization.

[Michael Lewis]

Right. What I'm hearing is that the actions of Ben Bernanke and the Fed probably prevented another depression. It avoided a lot of pain on the one hand. On the other hand, it infuriated a huge number of Americans.

[Emmy Nakamura]

I think it just feels terrible to see these institutions get bailed out who made such bad decisions. It was also the case that there were big bonuses that were paid out by the Wall street banks during this period of time, you know, which was a period of time when a lot of Americans didn't have jobs. And it's also the fact that in macroeconomics in general, but in this episode, for sure, you never get to see what would have happened without the intervention. So in the Great Depression, we saw this awful thing happen. The argument that Ben Bernanke was trying to make is that, well, it could have been even worse. And he, you know, he made it compellingly enough.

[Michael Lewis]

He's maybe the world's expert on this subject.

[Emmy Nakamura]

That's right. And he convinced Congress, people on both sides of the aisle that it was true, and that's why the interventions were so large.

[Michael Lewis]

Right. So we go from 1913 with a Fed that's yoked to the political process and is there mainly to kind of smooth out the money supply over the harvests to 2008, where you've got a Fed that is master manipulator of the entire economy. Two things. One is, is it now just generally understood that the role of the Fed is not just to smooth out the money supply over the harvest, just to run the money supply, but it's also got this other unconventional role in the event of crises where it can Buy and sell all kinds of stuff to make things better, in their view.

[Emmy Nakamura]

I think it is widely understood that that part of what the Fed does is probably here to stay. There are these questions. The Fed is a big actor in financial markets that affects people. It affects different people in different companies in different ways. And how does it sort of try to make that neutral or can it make it neutral? Those are things that are certainly sources of controversy today.

[Michael Lewis]

It's a source of controversy, but it's kind of undeniable. But the power of this or potential power of this institution has just grown. It's incredible, the power of this institution. And it is happening now in a climate where its independence is being threatened.

[Emmy Nakamura]

Right.

[Michael Lewis]

That a private actor, a president, could get ahold of this institution and use these new powers in a completely unorthodox way.

[Emmy Nakamura]

Now, one thing I would say is that its power can also be destroyed. In the 1970s, nobody believed the Fed about anything. So you really had to get into a situation with Volcker where people didn't believe them until they saw it. Right. He raised interest rates dramatically, but the Fed of that time did not have the power to promise things. And the same goes for inflation. So during the post Covid inflation surge, inflation got up to something like 7%. Through that whole time, professional forecasters were completely convinced inflation would get down 2% again. Completely convinced. Basically, you know, they had no worries about this. And that actually matters for regular people. Because if you went to get a mortgage, the mortgage rate you faced was based on the idea that inflation was going to be 2% again.

[Michael Lewis]

Right. Because they believed the Fed.

[Emmy Nakamura]

Because they believed it.

[Michael Lewis]

So there's enormous value in the trust in this institution.

[Emmy Nakamura]

That's right. And that absolutely can be destroyed.

[Michael Lewis]

Do you worry about the Fed's independence?

[Emmy Nakamura]

Of course. This is probably one of the most frightening times for Fed independence, or maybe the most frightening time for Fed independence since maybe the Volcker disinflation or something like that for a long time.

[Michael Lewis]

Since Nixon.

[Emmy Nakamura]

Yes.

[Michael Lewis]

But it's happening in a different environment where the importance of the institution is just bigger than it was. The awareness of how to use it is sort of more top of mind. It's like this big insurance policy on the financial markets.

[Emmy Nakamura]

And it's a moneymaker.

[Michael Lewis]

And it's a moneymaker.

[Emmy Nakamura]

It's a huge moneymaker. So, you know, so around the world, investors are willing to lend the US Government money at incredibly low interest rates. So that means the US government can run these huge deficits year after year and pay very little interest but most countries around the world don't have that luxury.

[Michael Lewis]

And we would lose that luxury if people cease to trust the Fed.

[Emmy Nakamura]

Because part of the reason people want to hold US Debt is because they trust that the US Government will not default in the sense if you borrow $100, they'll pay you back a hundred dollars, but also they won't have a lot of inflation. So those two things are required to make people really value your debt. And the second one is controlled by the Fed.

[Michael Lewis]

What do you make the odds that we're going to emerge from the Trump years with an independent Fed? If you're a betting lady, 80% that we'll have it.

[Emmy Nakamura]

I hope so.

[Michael Lewis]

Yeah, that sounds about right. Yeah, that sounds about right. I want to thank Emmy Nakamura for giving us an absolute masterclass on the Federal Reserve bank, its history, and the way it's changed. Emmy is the Chancellor's professor of Economics at UC Berkeley. You can find links to her work in our show, Notes.

[Lydia Jean Cott]

Against the Rules. The Big Short Companion is hosted by Michael Lewis. It's produced by me, Ludi Jean Cott, and Catherine Girardot. Our editor is Julia Barton. Our theme was composed by Nick Bertell and our engineer is Hans Dael. She Special thanks to Nicole Optin Bosch, Jasmine Faustino, Pamela Lawrence and the rest of the Pushkin Audiobooks team. Against the Rules is the production of Pushkin Industries. To find more Pushkin Podcasts, listen On the I iHeartRadio app, Apple Podcasts or wherever you listen to podcasts. And if you'd like to listen ad free and learn about other exclusive offerings, don't forget to sign up for a Pushkin subscription at Pushkin FM plus or on our Apple show page. And you can get the Big Short now at Pushkin FM Audiobooks or wherever audiobooks are sold.

[Michael Lewis]

And Doug, here we have the Limu imu in its natural habitat, helping people customize their car insurance and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug.

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[Michael Lewis]

They see us. Only pay for what you [e-mail] Liberty Liberty Liberty Liberty Savings Fairy Underwritten by Liberty Mutual Insurance Company and affiliates Excludes Massachusetts.

[Amazon Music Advertiser]

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[Emmy Nakamura]

This is an iHeart podcast.