How could the world's most advanced and enlightened economy allow an irresponsible, greedy and self-deluded congregation of Wall Street bankers to accumulate such gargantuan financial losses that the whole country was imperiled? For, as Churchill might have put it, never in the realm of economic activity have so many suffered so much at the hands of so irresponsible a group of bankers.
Michael Lewis attempts to answer this question through the stories of the relatively few professional investors who took the time to dig into the subprime mortgage market and perform careful credit analysis of the loan quality underpinning the whole market. What they found was not surprising. It was a credit disaster waiting to happen. What is revealing is the reception they received from mainline Wall Street firms, their own investors, and the credit rating agencies. In nearly all cases their views were discounted ("it could never happen in the US housing market;" "subprime loan losses will not all happen at the same time") and they were dismissed as misfits. The Wall Street money machine, fueled by huge financial rewards, animal spirits and a "we know better" culture, simply moved on heedlessly to even greater risks and excess. Well worth the read, but I would start with David Faber's book ("Then the Roof Caved In") if you are new to the mortgage-backed security world of Wall Street.
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