The Big Short

Preview

Come on in, because this story begins in a place that looked safe, smart, and respectable right up until it blew up in everyone’s face. The Big Short is a book about a financial disaster, but it does not really behave like a book about finance. It is a story about blind faith, mass self deception, and a system so complicated that almost no one inside it could see what it was doing. Or maybe they could see it and preferred not to. The great trick at the center of the drama was simple enough. American housing prices had become an object of worship. People believed they could only rise. Banks turned that belief into an industry. Wall Street scooped up home loans, packed them into bonds, sliced those bonds into tranches, had them blessed by ratings agencies, and sold them around the world as if risk had somehow been alchemized into safety. The more rotten the loans became, the more money the machine seemed to make. What makes the book so gripping is that it does not follow the crowd. It follows the weirdos who saw through it. These were not grand prophets standing on mountaintops. They were misfits, obsessives, oddballs, and one or two people so socially awkward they seemed almost designed to be ignored. Yet they noticed something everyone else missed, or perhaps refused to miss what everyone else was trying hard not to notice. They read the documents. They asked dumb sounding questions. They looked past the glossy surface and saw mortgage loans being made to people with no income, no job, no assets, and no chance of repayment. They saw that the bonds built from those loans were not solid at all. They were time bombs. Michael Lewis uses this catastrophe to ask a much...