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The Big Short
Book

The Big Short

Inside the Doomsday Machine

Michael Lewis
W.W. Norton, 2010
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Editorial Rating

9

Qualities

  • Innovative

Recommendation

If you wonder how the US suffered one of the most damaging financial crises in its history, catch Michael Lewis’s definitive history of the characters and plots that led to Wall Street’s undoing. He offers a black, sardonic portrayal of how smart, seemingly shrewd and very ambitious people – the elite of the elite, traders and quants alike – became obsessed with making money from a situation they didn’t fully understand. Then he profiles a tiny number of people who understood exactly what was happening and couldn’t believe their eyes. The book is not a chronology, but a set of portraits of these few victors, connected by the tale of the unfolding crisis. Though the book’s structure is not an asset, its writing is compelling. Interestingly, the savants Lewis depicts were strange characters with weird backgrounds, spurred by a mixture of cynicism and naïveté. They would not stop asking questions, did not accept the experts’ risk models, and were slow to trust anyone else’s knowledge or judgment. The darkest part of Lewis’s history is that no one held the major institutions that caused the crisis to account. getAbstract recommends this engrossing report to bankers, traders, journalists, historians and federal prosecutors.

Summary

Rip-Off

Steve Eisman appears on the very short list of people who both saw the financial crisis of 2008 approaching and made money on it. A graduate of yeshiva day schools, the University of Pennsylvania and Harvard Law, and a comic book fanatic, Eisman cut his chops analyzing “specialty finance” firms. He had a reputation as a truth-teller and as a man with absolutely no social skills. He was at heart a proud cynic whose curiosity and doubt enabled him to see through the ignorance, stupidity, false optimism and fraud that characterized an era on Wall Street.

In 2002, while working as a hedge-fund analyst focused on consumer finance, Eisman came across the Household Finance Company, a 120-year-old firm that developed a market selling second mortgages. He discovered that HFC was fooling people into thinking they would pay 7% interest on 15-year, fixed-rate loans when they would actually pay closer to 12.5%. Once he uncovered this fraud, he became a crusader and spread the word to reporters, advocates and government officials. Eventually, HFC settled a $484 million class-action suit. A year later, the British bank HSBC purchased HFC for $15.5 billion. HFC’s chief executive...

About the Author

Financial journalist Michael Lewis has written several bestsellers, including Moneyball and Liar’s Poker. He also once sold bonds in the London office of Salomon Brothers.

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    a. A. getAbstract 1 decade ago
    Hard to argue against the conclusions drawn here. The real question is if/when this will happen again? And has Wall Street learned from their mistakes?

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