One-on-One with Christine Lagarde, featuring Michael Lewis

Location: HQ1 Atrium, HQ1-1-700

This one-on-one conversation between IMF Managing Director Christine Lagarde and best-selling author Michael Lewis is first in a the first in an annual series of half-hour discussions aimed at bringing different perspectives to bear on key issues relevant to the Fund.

Join the conversation via #1on1Lagarde

Panelists

Christine Lagarde, Managing Director, IMF

Christine Lagarde has been Managing Director of the International Monetary Fund since July 2011. She held various ministerial positions within the French government, including Finance and Economy Minister (2007–11), Minister for Foreign Trade, and Minister for Agriculture and Fisheries. She was also Chairman of the Global Exchange Committee and Global Strategic Committee of Baker & McKenzie.

Michael Lewis, Author and Financial Journalist

Michael Lewis is the author of many best sellers, including The Big Short and Boomerang, both set in the global financial crisis, and Liar’s Poker, a Wall Street story based partly on his experience as a Salomon Brothers bond salesman. His next book, The Undoing Project—about the Nobel Prize-winning collaboration of Daniel Kahneman and Amos Tversky on how the human mind works—is due out in December. Mr. Lewis is also a columnist for Bloomberg News and a contributing writer to Vanity Fair.

Video

Photos

Prepared by the Secretary’s Department

Contributor: Rodolfo Dall’Orto

A one-on-one conversation between IMF Managing Director Christine Lagarde and financial journalist and best-selling author Michael Lewis on changes in the financial sector, women in high positions in the financial sector, and communication and traction of the IMF’s policy advice.

Key Points:

Changes in the financial sector:

- Lewis noted that, while writing Liar’s Poker in the late 1980s, the financial culture was undergoing a big transformation that had some potentially corrosive features: the decline in partnership structures and the rise of corporations; the rise in complexity of financial instruments, which quickly came to function as a form of opacity; and the rise of the idea that big Wall Street banks were not servicing but trading enterprises. Each of these changes played a very big role going into 2008. There were bad incentives that prompted individuals to do good things for themselves that were bad for the institutions. As a result of regulation, there has been some change in the financial sector since the global financial crisis (e.g., changes in compensation schemes and efforts to reduce proprietary trading in big institutions) but it is not nearly enough to ensure that giant financial institutions do not do harm, and there has not been a decline in the complexity of instruments either. More importantly, the wider public has not been persuaded that changes have happened. Lewis noted that the Bank of England has done much better work than in the United States to change the culture of finance.

Women in high positions in the financial sector:

- While writing The Big Short and Boomerang, Lewis wondered how much better off would all of us be if men had been removed from top positions in financial institutions, noting studies about male overconfidence and its financial effects. He was also struck with how ruthlessly the system treated women who were near power during the financial crisis. He was worried that when a woman is put in a position of prominence in finance, she is put there to take the fall if things go wrong.

- Lagarde noted that there are a few more women in high positions (e.g. Janet Yellen, who, in Lagarde’s view, receives more criticism than many of her predecessors despite her great work); but, still, men and women need to push collectively to allow women to bring a lot of the value that is needed in the financial sector.

Communication and traction:

- Lagarde wondered whether the IMF should change its language and the way it communicates its policy advice, because the message does not come across very well 49 sometimes, and public opinion does not see that the IMF has changed and that it might be advising for the better.

- Lewis responded that doing so could discredit the IMF and jeopardize its relations with the authorities. Nevertheless, the IMF could let in and invite more storytellers that do not work for the IMF and that can build trust with the public (e.g., podcasts coming out from the IMF done by people who do not work for the IMF). For him, two stories need to be urgently addressed: stories about inequality and stories about the lack of trust.

Quotes:

“More importantly, has the wider public been persuaded that changes have happened [in the financial sector]? Not at all.” Michael Lewis, financial journalist and best-selling author

“Women can actually bring a lot of the value that is needed in the financial sector.” Christine Lagarde, Managing Director, International Monetary Fund

“My ambition is to create a television drama. The first idea I had was about three women that start a hedge fund and the premise of the hedge fund is exploiting the idiocy of men. […] That would enable me to get at the problem. Getting that on the air is hard; I got close once and I am about to try again.” Michael Lewis, financial journalist and best-selling author

“We have been repeating some messages lately about growth, about inclusiveness, about inequality, but I think we could come across in a much louder, more efficient way.” Christine Lagarde, Managing Director, International Monetary Fund

“The stories that need to be told, right now, are the stories about inequality.” Michael Lewis, financial journalist and best-selling author

“The whole system depends on trust, and we have kind of forgotten that.” Michael Lewis, financial journalist and best-selling author

“If you are not useful and you do not know very much, the only place where you can really get rich is Wall Street.” Michael Lewis, financial journalist and best-selling author