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A review by vegantrav
The Big Short: Inside the Doomsday Machine by Michael Lewis
5.0
You might think that a book about subprime mortgages, bonds, credit default swaps, and collateral debt obligations just has to be boring. You would be wrong. Very wrong.
Michael Lewis carefully delineates how and why the financial crisis of 2008 occurred. He does it by telling the stories of a handful of individuals who all saw the problems with subprime mortgages when the rest of Wall Street was blind to this matter--largely blinded by the obscene amounts of money that they were making by selling bonds on bundles of these mortgages.
Because its subject matter is very complex, this book is very challenging; you really have to focus and attend to Lewis's presentation very closely in order to grasp how the credit default swaps and collateral debt obligations worked and were manipulated, but once you see the light, you'll have an "aha" moment where you will, like the main cast of characters, be asking yourself, "How was this legal?"
The 2008 crisis was caused not just by lending companies and banks making subprime mortgage loans to people who were almost certain to default but also by Wall Street firms and hedge fund managers who initially made rivers of money by buying and then selling bonds that were issued for the subprime loans. If the bonds had been properly rated, no one would have bought them because the subprime mortgages that they were issued for were made to horrible credit risks, but the bond ratings agencies, Moody's and Standard and Poor's, were paid by the Wall Street firms to rate the bonds, and if they gave bad ratings, then they were less likely to be hired to rate more bonds, so the ratings agencies had a financial incentive not to rate the bonds poorly. It's really amazing that what happened was perfectly legal.
Money quote from the book:
"The upper classes of this country raped this country. You fucked people. You built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience. Nobody ever said, 'The is wrong.'" --Steve Eisman, one of the few investors who saw the 2008 financial crisis coming and who made tens of millions of dollars by taking a short position on CDOs (collateral debt obligations), which were basically bonds made up bundles of subprime loans
Michael Lewis carefully delineates how and why the financial crisis of 2008 occurred. He does it by telling the stories of a handful of individuals who all saw the problems with subprime mortgages when the rest of Wall Street was blind to this matter--largely blinded by the obscene amounts of money that they were making by selling bonds on bundles of these mortgages.
Because its subject matter is very complex, this book is very challenging; you really have to focus and attend to Lewis's presentation very closely in order to grasp how the credit default swaps and collateral debt obligations worked and were manipulated, but once you see the light, you'll have an "aha" moment where you will, like the main cast of characters, be asking yourself, "How was this legal?"
The 2008 crisis was caused not just by lending companies and banks making subprime mortgage loans to people who were almost certain to default but also by Wall Street firms and hedge fund managers who initially made rivers of money by buying and then selling bonds that were issued for the subprime loans. If the bonds had been properly rated, no one would have bought them because the subprime mortgages that they were issued for were made to horrible credit risks, but the bond ratings agencies, Moody's and Standard and Poor's, were paid by the Wall Street firms to rate the bonds, and if they gave bad ratings, then they were less likely to be hired to rate more bonds, so the ratings agencies had a financial incentive not to rate the bonds poorly. It's really amazing that what happened was perfectly legal.
Money quote from the book:
"The upper classes of this country raped this country. You fucked people. You built a castle to rip people off. Not once in all these years have I come across a person inside a big Wall Street firm who was having a crisis of conscience. Nobody ever said, 'The is wrong.'" --Steve Eisman, one of the few investors who saw the 2008 financial crisis coming and who made tens of millions of dollars by taking a short position on CDOs (collateral debt obligations), which were basically bonds made up bundles of subprime loans