Nicholas Karpuk's Reviews > The Big Short: Inside the Doomsday Machine

The Big Short by Michael Lewis
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Oct 30, 12

Read from October 10 to 28, 2012

This book would probably make any reasonable person angry. There's several scandals in the last decade or more where I feel like people would be more pissed if the problem weren't too abstract for an elevator pitch. Beyond the mortgage crisis, the Enron scandal seems like a good example.

I kept highlighting passages in the book because they sum up the obfuscation pretty damn well:

"'I asked everyone in the house to make sure their accounts at HSBC were insured. I told them to keep some cash on hand, as we might face some disruptions. But it was hard to explain.' How do you explain to an innocent citizen of the free world the importance of a credit default swap on a double-A tranche of a subprime-backed collateralized debt obligation?"


This one also popped out at me:

For more than twenty years, the bond market's complexity had helped the Wall Street bond trader to deceive the Wall Street customer. It was now leading the bond trader to deceive himself.


In this crisis tedious complexity almost seemed like a weapon used against anyone who might try to interfere with the value of these crappy bonds built around crappy mortgages.

There seem to be a few things that held this all together. A boys' club where everyone felt confident about the bonds because everyone else felt confident about the bonds. A ratings agency not empowered to do any actual investigation for the thumbs up they were giving the bonds. And the utter confusion of everyone else, even including government regulators.

The books focus keeps it accessible, since Lewis generally sticks to the few figures who anticipated the collapse of the sub-prime mortgage and bet against it. They're all outsiders, and more than one of them appear to have deep-seated psychological problems. It makes for a fascinating read.

Personality is most of what kept me going. At this point I'm still not sure I could explain the sub-prime mortgage crisis to someone ignorant of the matter and get them to understand.

The best way I can articulate it is to say that it seems like they allowed the gamblers to make up their own rules for how the game is played. It seems like America has their smartest people on the wrong side of the betting table.
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Reading Progress

10/10/2012
43.0% "This book angries up the blood."

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