Featuring an exclusive audio interview with Michael Lewis
When the crash of the U.S. stock market became public knowledge in the fall of 2008, it was already old news. The real crash, the silent crash, had taken place over the previous year, in bizarre feeder markets where the sun doesn’t shine, and the SEC doesn’t dare, or bother, to tread: the bond and real-estate derivative markets, where geeks invent impenetrable securities to profit from the misery of lower- and middle-class Americans who can’t pay their debts. The smart people who understood what was or might be happening were paralyzed by hope and fear; in any case, they weren’t talking.
The crucial question is this: Who understood the risk inherent in the assumption of ever-rising real-estate prices, a risk compounded daily by the creation of those arcane, artificial securities loosely based on piles of doubtful mortgages?
Michael Lewis turns the inquiry on its head to create a fresh, character-driven narrative brimming with indignation and dark humor, a fitting sequel to his number-one best-selling Liar’s Poker. "Who got it right?" he asks. Who saw the ever-rising real-estate market for the black hole it would become, and eventually made billions of dollars from that perception? And what qualities of character made those few persist when their peers and colleagues dismissed them as Chicken Littles?
Out of this handful of unlikely—really unlikely—heroes, Lewis fashions a story as compelling and unusual as any of his earlier best sellers, proving yet again that he is the finest and funniest chronicler of our times.
©2010 Michael Lewis (P)2010 Simon & Schuster
“No one writes with more narrative panache about money and finance than Mr. Lewis....[he] does a nimble job of using his subjects’ stories to explicate the greed, idiocies and hypocrisies of a system notably lacking in grown-up supervision....Writing in faintly Tom Wolfe-ian prose, Mr. Lewis does a colorful job of introducing the lay reader to the Darwinian world of the bond market.” (Michiko Kakutani - The New York Times)
“Superb: Michael Lewis doing what he does best, illuminating the idiocy, madness and greed of modern finance. . . . Lewis achieves what I previously imagined impossible: He makes subprime sexy all over again.” (Andrew Leonard - Salon.com)
"[Michael Lewis] is the finest storyteller of our generation.” (Malcolm Gladwell)
Michael Lewis has the gift of being able to explain the most complicated financial concepts in easy to understand language. He has done this in spades in describing the conplicated sub-prime morgage market and the complex financial instuments conceved of by the so called wizards of wall street. A must for any investor or anyone interested in investing. It reads like a mystery thriller.
My first objective was to get more insight about the 2008 crash, which was accomplished very well. For my surprise it was in a very entertaining context, character dynamics, humor and structure are to be appraised as much as it's content.
This is a great book, really well read.
Several years ago we refinanced our home and it stuck me how ridiculous it was that banks were just begging me to take a loan and no one was even checking if I had any income. Unfortunately, I did not have the foresite of some of the characters in this book, and they are truly characters. The basic tenet of the whole book comes down to that: if it seems to good to be true, it probably is, and just basic common sense indicated that the system was unsustainable. I just wish I had a background that would have allowed me to make billions off the same basic gut feeling the protagonists did.
If you want to read one book that makes you understand what this whole mess is about, and how greed led us into this mess, this is the book to read. It is a clear articulation of what the fundamentals the led to this economic crisis were mismanaged. I hope some senators read this.
Its also great insight into the human character. AS the author said on NPR, its amazing what one can overlook when you are being paid huge sums of money to overlook things.
It is also an interesting insight into human nature in that these "outsiders" who placed huge bets against the financial system and came up huge winners now all of a sudden are having trouble “trusting” their own thoughts/ideas, as they have become entrenched in their own thinking and sort of “insiders” now. It reflects that sometimes the most innovate freshest thoughts come from people who might be least expected to produce these insights.
This is the first Michael Lewis book i have read but from excerpts of other books this seems fairly consistent with his style. A great great fast entertaining but very insightful read. For the first time I felt like understood what the last few years have been about. If I could give it more than 5, I would.
If you read only one book about the causes of the recent financial crisis, let it be Michael Lewis' The Big Short. The thing that makes his story so great is that he tells it through the eyes of the 4 groups of men that had the courage to take a position that opposed the smartest men in the financial industry and, sad to say, our government. They were some of the first to see the fraud behind the subprime meltdown and found a way to make a fortune off the financial systems' crash.
Michael Lewis'; new book gives a slightly less complicated view into the disaster by recounting the stories of these savvy renegades who cashed in on their belief that the system was rotten. In doing so, we end up rooting for people who helped bring about the catastrophe that put a lot of good people out of work.
Still, the stories of these men make clear the greed, stupidity and double standards of a system lacking in grown-up supervision. A system, refueled by tax payer billions, that continues to be filled with the same firms, the same super rich executives, and the same destructive thought processes that disdained the need for government regulation in good times, but insisted on being rescued by government in bad times.
This is a fascinating book that should be read by anyone that wants to better understand the causes of the recent financial crisis. Be careful, as one reader put it, "Don't read this if you want to mellow out. This book will make you furious."
After reading this book, I finally understood what caused the market crash in 2008. It was so inevitable and the few who saw the coming disaster profited greatly. Michael Lewis made a very, very complex problem understandable. I finally understand what a credit default swap is. Warning! This book is not for the financially faint of heart. Well worth the effort.
Perhaps because I've read SO much good journalism about this and heard Michael Lewis speak on it so eloquently on radio & TV, the pace of this account was hard for me to get into. I found it slow, with explanations of default swaps and collateralized debt obligations and short sells that I've become bored of since the crash. I suspect the written book trumps the audio because you can skim dry economic explanations whereas the narrator has to plod through them slowly. You'll need to be willing to put in time and effort for this one. I'm not.
As someone who worked rather extensively on financial regulatory policy during and immediately after the financial crisis, I thought I understood quite a bit about factors contributing to the sub-prime bubble and about structured finance generally. But it was not until I read this book that I really grasped the full extent to which most of the "masters of the universe" on Wall Street had no idea what the f--k their banks and funds were doing in the frenzy of securitization and greed in the years preceding the financial crisis.
For anyone who wants to understand exactly how we went from a booming bull market in 2006 to near economic and financial collapse in 2008, this is the book to read.
Michael Lewis at his incisive best.
The mechanics of mortgage "tranching," and the extent to which so many Wall Street firms were genuinely blindsided when the monster they conceived, nurtured, and created, came calling for them. (I loved how Lewis correctly notes that it was Goldman Sachs who first recognized the nature of the systemic risk they did so much to create, and managed to profit from it...love them or hate them (and I put myself in the latter category), its uncanny how those guys are always a step ahead.
Besides the perfect production of The Big Short, this is one of the most fascinating books I've ever listened to. We all have a general understanding of the cause of the economic recession of 2008, but it is rather small minded. We tend to think "oh, it was all those idiots taking out mortgages they couldn't pay for!" Or we thought "it was overspeculation on the housing market!" Michael Lewis provides an accurate look at the underlying problems, the real unfairness, and some priceless insight to the state of our economy and society.
Reads like a documentary
Many technical terms to learn
Lots of dry humor
Overall awesome book. I can't wait to get my hands on more.
But depressing at the end to see the government bailout to companies who should have been allowed to fail.
I didn’t expect to enjoy this as much as I did. It’s nonfiction. It’s true stories behind three groups of investors who bet against the subprime mortgage market. It was well done and kept my interest. I was fascinated watching these groups, and it was fun seeing them “win” in the end. During the story I was amazed at the arrogance, incompetence, and bad judgment of AIG (the insurance company who offered this insurance and received premiums) and the large investment firms like Goldman Sachs and Morgan Stanley. I was also angry at the two rating agencies, Moody’s and S&P. They didn’t do their job. They gave high ratings to these loans, which meant outsiders would be willing to buy them. See below for more on this.
Then, I was depressed at the end of the book when the author talked about the bailout by the US government. Billions of taxpayer dollars were given to many different banks, brokerage firms, and companies. My personal conclusion is that SOME of these companies should NOT have been given bailout money. Some of those might have failed, but it wouldn’t kill our economy. Others could have absorbed the losses and still be around, but their management and shareholders would be a little poorer. For more on this see Wikipedia, search TARP.
Most of my reading is fiction for relaxation and fun. This book does not fit those criteria. It’s too cerebral. But I enjoyed it as an audiobook.
WHAT ARE SUBPRIME MORTGAGES AND THE BET:
This book is about the subprime mortgages causing (or making worse) the real estate collapse in 2007. An immigrant migrant farm worker comes to the US. He has no past credit history. An unscrupulous mortgage loan officer gives the worker a $750,000 loan to buy a house with low payments for two years, then huge payments would begin. The bankers group a thousand of these loans into one package and call it a bond. They sell the bond to others. Michael Burry was the first person who approached an investment banking firm asking if he could buy an insurance policy that would pay him the face amount of the loans if the loans went bad. In return Michael would pay a yearly insurance premium. AIG said we’ll take your premium payments and write the insurance for you. (This insurance policy is called a credit default swap.) Michael expected the loans to go bad at the two year mark, and then be foreclosed upon. Michael had nothing to do with the loans. He was like a gambler going to Las Vegas to place a bet.
I AM ANGRY AT THE RATING AGENCIES:
The two biggest rating agencies are Moody’s and S&P. Moody’s assigns ratings to bonds. Aaa is the safest, A is in the middle, B is the lowest. Most companies (and investors) have policies to only buy bonds with a certain rating. If the rating agencies had done their job, many companies would NOT have bought the bad bonds and not have needed the bailout.
Goldman Sachs (GS) and others did misleading things. That didn’t surprise me. I’m sure other companies and banks have plenty of skepticism when dealing with them. So the big problem here was S&P and Moody’s. I’m editing the following for brevity and clarity (page 171). Vinny asks the S&P analyst Ernestine for details about the loans behind one of these bonds, for example, the types of borrowers, terms, and property locations of the loans. Ernestine said she didn’t have that information. (Wall Street issuers like Goldman Sachs) “won’t give it to us.” Vinny said “You need to demand to get it!” She said “We can’t do that.” Vinny said “Who is in charge here? You’re the cop. Tell them to give it to you!!!” Vinny’s partner concluded that “S&P was worried that if they demanded the data from Wall Street, Wall Street would just go to Moody’s for their ratings.” An email was later produced in testimony to Congress from an S&P managing director (to his rating analysts) that said “Any request for loan-level tapes is TOTALLY UNREASONABLE!! Most originators don’t have it and can’t provide it. Nevertheless we MUST produce a credit estimate. It is your responsibility to provide those credit estimates and your responsibility to devise some method to do so.” (My thoughts: I was so angry at S&P and Moody’s! They are supposed to be the independent agencies telling us what we are buying. And they are not doing their job because they don’t want to upset who-is-paying-the-bill for the rating? I wonder what happened to the writer of that email?)
NARRATOR: Jesse Boggs was excellent.
GENRE: financial nonfiction.
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