Podcast Summary
How to Money × Against the Rules: The Big Short Companion – "How the Financial Crisis Broke Wall Street"
Original air date: November 23, 2025
Host: Michael Lewis
Guest: Matt Levine (Bloomberg Opinion Columnist & Money Stuff creator)
Theme: The lasting financial consequences of the 2008 crisis—how Wall Street changed, where risk migrated, the emergence of Bitcoin, regulatory results, and the future of banking.
Episode Overview
This episode is a special crossover between Michael Lewis' Against the Rules and the "How to Money" ethos, serving as a companion to The Big Short. Michael Lewis and guest Matt Levine explore how the 2008 financial crisis reshaped Wall Street, shifted the locus of risk, sparked a “status revolution” in finance, inspired Bitcoin and the rise of stablecoins, and led to evolving regulatory and market dynamics. The discussion also reflects on what we learned (and failed to learn) from the 2008 debacle, the cyclical nature of financial crises, and speculation on a future without traditional banking.
Key Discussion Points and Insights
1. Personal Recollection of the 2008 Crisis
- Where were you when it happened?
- Matt Levine recalls learning about Lehman Brothers' collapse while at a wedding in Napa Valley, feeling that "the world just ended" while everyone else seemed oblivious.
“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?” – Matt Levine [05:12]
- Matt Levine recalls learning about Lehman Brothers' collapse while at a wedding in Napa Valley, feeling that "the world just ended" while everyone else seemed oblivious.
- Working at Goldman Sachs
- Levine was in investment banking at Goldman during the crisis. He describes the uncertain atmosphere, rounds of layoffs, and a months-long period with “no deals happening.”
“I just sat at my desk and panicked and tried to get deals to happen, and no deals happened.” – Matt Levine [06:43]
- Levine was in investment banking at Goldman during the crisis. He describes the uncertain atmosphere, rounds of layoffs, and a months-long period with “no deals happening.”
2. Wall Street's Transformation post-2008
- Loss of Status for Big Banks
- Top investment banks like Goldman Sachs and Morgan Stanley lost their “king of the hill” status. New elite institutions emerged: major hedge funds, alternative asset managers (Apollo, KKR, Blackstone), and high-frequency trading firms.
“The power really shifted away from the investment banks for a bunch of reasons...” – Matt Levine [08:23]
- Top investment banks like Goldman Sachs and Morgan Stanley lost their “king of the hill” status. New elite institutions emerged: major hedge funds, alternative asset managers (Apollo, KKR, Blackstone), and high-frequency trading firms.
- Change in Risk-Taking: Who Holds the Risk Now?
- Due to regulatory changes and institutional failures, traditional banks reduced leverage and proprietary trading. Risk migrated to less regulated entities—hedge funds, private equity, “shadow banks.”
“But it's definitely like the prestige locations on Wall street have shifted...because they can take more risk.” – Matt Levine [09:59]
- Due to regulatory changes and institutional failures, traditional banks reduced leverage and proprietary trading. Risk migrated to less regulated entities—hedge funds, private equity, “shadow banks.”
- Regulatory Backdrop
- Regulatory efforts post-2008 aimed to prevent banks’ risky activities from threatening the financial system (since banks’ failures were socialized), but left “shadow” entities with more flexibility—and risk.
“There’s a regulator who's watching the bank... with private credit firms, they can kind of do what they want because they're much more lightly regulated...” – Matt Levine [13:32]
- Regulatory efforts post-2008 aimed to prevent banks’ risky activities from threatening the financial system (since banks’ failures were socialized), but left “shadow” entities with more flexibility—and risk.
3. The Shadow Banking System and New Risks
- System Stability and New Leverage
- The migration of risk led to more stability among regulated banks; however, new kinds of risks emerge as leverage creeps into non-bank financial institutions, sometimes at extraordinary ratios.
“...the system right now feels less blow up than it was in 2007 because there is less of that short term financing against like whatever people are up to.” – Matt Levine [12:16]
- The migration of risk led to more stability among regulated banks; however, new kinds of risks emerge as leverage creeps into non-bank financial institutions, sometimes at extraordinary ratios.
- Light Regulatory Touch and Potential Hazards
- Concerns exist that if these large, lightly regulated institutions (e.g., multi-strategy hedge funds) were to “blow themselves up,” government might once again be forced to socialize losses, repeating 2008’s controversies.
“If the big hedge funds that have become so central to the financial system find a way to blow themselves up, like, will those losses get socialized? Maybe.” – Matt Levine [15:22]
- Concerns exist that if these large, lightly regulated institutions (e.g., multi-strategy hedge funds) were to “blow themselves up,” government might once again be forced to socialize losses, repeating 2008’s controversies.
4. Bitcoin and Crypto: Children of the Crisis
- Bitcoin as Reaction to 2008
- Bitcoin (and the broader crypto movement) draws from distrust in traditional banking fostered by the '08 crisis; Satoshi Nakamoto’s white paper references these systemic failings.
“It seems like the pseudonymous Satoshi Nakamoto was upset by the leverage in the banking system and by the socialization of losses ... and wanted a financial system that didn’t look like that…” – Matt Levine [15:52]
- Bitcoin (and the broader crypto movement) draws from distrust in traditional banking fostered by the '08 crisis; Satoshi Nakamoto’s white paper references these systemic failings.
- Crypto Repeats the Same Mistakes
- Ironically, while born as an “institution-free” alternative, crypto quickly recreated intermediaries, risk, and leverage—culminating in collapses like FTX that mirror 2008’s mistakes.
“Crypto quickly replicated a lot of the elements of the levered fractional reserve risky financial system…” – Matt Levine [16:35]
“It truly just relearned the lessons of 2008. And like one thing you learn is that it's all the same thing, right? Like a financial crisis is they all look the same.” – Matt Levine [18:43]
- Ironically, while born as an “institution-free” alternative, crypto quickly recreated intermediaries, risk, and leverage—culminating in collapses like FTX that mirror 2008’s mistakes.
- No Bailout for Crypto (Yet)
- Unlike banks, crypto collapses (so far) don’t carry systemic risk to the broader economy—so no government bailouts. However, this could change as crypto intertwines more with traditional finance.
“There's no government bailout because it didn't matter, right? Like all of crypto could go to zero and nothing outside of crypto would be affected by that.” – Matt Levine [19:45]
- Unlike banks, crypto collapses (so far) don’t carry systemic risk to the broader economy—so no government bailouts. However, this could change as crypto intertwines more with traditional finance.
5. Lessons Learned (and Not Learned) from 2008
- Core Crisis Mechanism: Short-Term Leverage on “Safe” Assets
- The central error: institutions think “safe” assets justify highly leveraged, short-term funding. When confidence is lost and short-term funding vanishes, even robust institutions can collapse rapidly.
“The problem is when you, a bank, whoever buys stuff that they think is pretty safe... So we can fund it by borrowing overnight against it... That is like the source of all financial crises.” – Matt Levine [21:26]
- The central error: institutions think “safe” assets justify highly leveraged, short-term funding. When confidence is lost and short-term funding vanishes, even robust institutions can collapse rapidly.
- Misperception of Asset Quality vs. Funding Structure
- It’s not just holding risky assets—it’s thinking you can fund long-term assets with fragile, short-term borrowing, making the system “runnable.”
“Risky stuff is fine if everyone knows it’s risky stuff. Right. What's bad is when ... you get blown up.” – Matt Levine [23:22]
- It’s not just holding risky assets—it’s thinking you can fund long-term assets with fragile, short-term borrowing, making the system “runnable.”
- Regulatory Shifts
- Regulations post-crisis forced banks to hold more capital and liquidity and reduced short-term funding, but risks resurface elsewhere (e.g., regional banks, crypto).
6. Where to Watch for the Next Financial Crisis
- Hedge Funds as the New Banks?
- Levine points to large multi-strategy hedge funds as the likeliest locus for the next crisis: highly-levered, central to markets, reminiscent of the old banks.
“The big four, like the multi strategy hedge funds... they're highly levered. And all these people, banks, hedge funds, everyone has learned ... but you keep turning the dial a little bit more towards risk...” – Matt Levine [24:31]
- Levine points to large multi-strategy hedge funds as the likeliest locus for the next crisis: highly-levered, central to markets, reminiscent of the old banks.
7. Other Lasting Consequences: Regulation and Public Attitude
- Consumer Financial Protection Bureau (CFPB)
- Although its mandate only partially stems from the crisis, the CFPB and “tough on banks” politics are downstream of public anger toward banks post-2008.
“So it's easier to regulate banks just generally, right. Like banks have less of an ability to get what they want. I think that is broadly a consequence of the crisis.” – Matt Levine [25:47]
- Although its mandate only partially stems from the crisis, the CFPB and “tough on banks” politics are downstream of public anger toward banks post-2008.
8. The Future of Banking: Narrow Banks, Stablecoins, and Beyond
- Narrowing the Banking Function
- Risk-taking is moving to institutions with long-term equity funding (private credit, hedge funds), while “banking” is becoming narrower and safer: money market funds, stablecoins, etc.
“One thing that I write about a lot is that banking has become narrower.” – Matt Levine [27:17]
- Risk-taking is moving to institutions with long-term equity funding (private credit, hedge funds), while “banking” is becoming narrower and safer: money market funds, stablecoins, etc.
- Stablecoins as an Existential Threat to Banks
- Stablecoins—crypto assets pegged to the US dollar, invested in government securities—threaten the traditional deposit/lending model, especially for regional banks.
“Stablecoins are potentially an existential threat to regional banks.” – Matt Levine [29:15]
- Stablecoins—crypto assets pegged to the US dollar, invested in government securities—threaten the traditional deposit/lending model, especially for regional banks.
- Imagining a World Without Banks
- Conceivable that non-banks (private equity, annuity providers) handle all long-term lending and individuals keep funds in stablecoins or digital cash—though the transition would be messy.
"I think it's pretty easy to imagine a world without banks. It's very hard to imagine the transition." – Matt Levine [30:49]
- Conceivable that non-banks (private equity, annuity providers) handle all long-term lending and individuals keep funds in stablecoins or digital cash—though the transition would be messy.
Notable Quotes & Memorable Moments
- On the “world ending” at Lehman’s collapse:
“Do you not understand that the world just ended?” – Matt Levine [05:12]
- On the shifting status in finance:
“The prestige locations on Wall street have shifted to the big hedge funds, the big asset managers, the big high frequency trading firms.” – Matt Levine [09:42]
- On financial crises:
“A financial crisis is—they all look the same.” – Matt Levine [18:43]
- On lessons not learned:
“Risky stuff is fine if everyone knows it’s risky stuff. Right. What's bad is when you’re buying AAA stuff that you think is good... you get blown up.” – Matt Levine [23:22]
- On stablecoins and the future:
“Stablecoins are potentially an existential threat to regional banks.” – Matt Levine [29:15]
Key Timestamps for Important Segments
- [05:12] Matt Levine’s personal experience during the Lehman collapse
- [08:23] How Wall Street status and risk-taking changed post-2008
- [12:22] Shift of leverage and risk into shadow banks and hedge funds
- [15:52] Bitcoin as a direct response to banking failures in 2008
- [18:43] Crypto’s 2022 crisis as a replay of 2008’s systemic failures
- [21:26 & 23:22] The real lesson of financial crises: over-leverage on “safe” assets with short-term funding
- [24:31] Potential for new crisis in large multi-strategy hedge funds
- [25:47] Public opinion and bank regulation post-crisis
- [27:17 & 29:15] Narrow banking, stablecoins, and their challenge to traditional banking
- [30:49] Speculating on a world without banks
Overall Tone and Style
Lewis’s trademark narrative insight and wit combine with Matt Levine’s clear, analytical, and occasionally sardonic expertise. The episode moves quickly but deeply, balances jargon-free explanation with real-world anecdotes, and maintains a dry, wry sense of humor—especially regarding Wall Street’s shifting sense of self-importance and the ironies of the crypto “revolution.”
Final Thought
This episode offers a comprehensive, nuanced look at how the aftershocks of 2008 continue to shape finance, with a clear-eyed view of innovations, regulatory reactions, and the ever-repeating patterns of risk, hubris, and crisis. Even for listeners not steeped in finance, the hosts make the story understandable—and fascinating.
For further episodes and resources, visit the How to Money or Against the Rules podcast sites, or consult the “Big Short Companion” series for more in-depth explorations of finance, money, and risk.