Paperback, 320 pagesPublished November 16th 2015 by W. W. Norton & Company (first published November 2009)
From the author of The Blind Side and Moneyball, The Big Short tells the story of four outsiders in the world of high-finance who predict the credit and housing bubble collapse before anyone else. The film adaptation by Adam McKay (Anchorman I and II, The Other Guys) features Academy Award® winners Christian Bale, Brad Pitt, Melissa Leo and Marisa Tomei; Academy Award® nominees Steve Carell and Ryan Gosling.
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. 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? In this fitting sequel to Liar’s Poker, Michael Lewis answers that question in a narrative brimming with indignation and dark humor.
…there’s a difference between an old-fashioned financial panic and what had happened on Wall Street in 2008. In an old-fashioned panic, perception creates its own reality: Someone shouts “Fire!” in a crowded theater and the audience crushes each other to death in its rush for the exits. On Wall Street in 2008 the reality finally overwhelmed perceptions: A crowded theater burned down with a lot of people still in their seats. Every major firm on Wall Street was either bankrupt or fatally intertwined with a bankrupt system. The problem wasn’t that [they] had been allowed to fail. The problem was that [they] had been allowed to succeed.
I must just have a thing for any work having to do with the “Doomsday Machine” that was our economy at and around the Great Recession. Not only did I thoroughly enjoy this book–and learned a hell of a lot from it as well, but I also would put Carousel Court, a fictional account of the Great Recession, in my top 5 reads of 2016.
There are 2 major reasons for why I’m so enthralled by this phenomenon that occurred in our country and had ripple effects throughout the world economy: 1) When this was happening in 2007 and 2008, I was in college. Just another undergraduate student with big dreams and small money. I didn’t notice what was going on, as so many around me didn’t, because I was used to living off of Ramen noodles and Red Bull, me and 5 of my friends piling into my sedan to go to parties, then still holding down jobs we hated on top of it all. The struggle was real–and it was normalized at that point in our lives, so, at that time, it didn’t occur to me that what was going on around me was not the norm. But now, in retrospect, with the sharpened eyes and heightened cultural awareness I have now, it enthralls me for another reason too (2): because the greed, stupidity and raging capitalism that brought this country to its knees (only for our taxpaying dollars to bail it out and pick it back up again, of course) is what I came to understand that we are widely known for and understood as the world over during my time living overseas. Not the Recession itself, but the mentality that got us there. To see it here, to experience it as close to the inside as I can be, so many years removed, through Michael Lewis’ The Big Short is to understand what has become our weakness and our strength (depending on who you ask) and a global caricature of our mores, our values and our very personalities: greed to the point of raging ignorance.
Don’t worry, I won’t soapbox here unless you ask me to.
The basic idea here stemmed from what we already know of America: it is a land where quite often the rich do get richer while the poor do get poorer, and, because of that, there opened up a market for subprime lending like a yet-undiscovered sea full of plentiful fish just waiting to be pillaged and plundered by Wall Street and the big banks. Not only that, but the big banks functioned like dope boys, essentially, flipping their profits at the buyers’ expense, destroying their surroundings as they did so–only, these flips yielded billions upon billions, and the companies lost billions upon billions as well. The system was set up to profit from others’ losses: as homeowners went into default, homes were lost and lives derailed, there was always someone else there on the other side of the bet (or swap) to get rich off of their loss by buying and betting on the debts of average Americans.
The subprime market tapped a segment of the American public that did not typically have anything to do with Wall Street: the tranche between the fifth and twenty-ninth percentile in their credit ratings. That is, the lenders were making loans to people who were less creditworthy than 71 percent of the population.
I can’t even go into the ratings companies, Moody’s and S&P, who should have been policing this, but were instead lining their own pockets by selling AAA ratings for fees and looking the other way. And, I won’t even further comment on how the mortgage bond market was born and allowed to grow to the size that the U.S. economy came to depend on its stability, all out of greed and ripping of subprime borrowers. Nope, won’t do it–but what I will do is say that anyone who’s never read this book, anyone who is still scratching their heads and trying to figure out, “What the hell was that about?” should pick up this book and read it.
Not only was it a phenomenal read–wholly entertaining, comedic even–but it was also very insightful. I guarantee you, love this country though we do, you’ll understand the next time you’re abroad and you get the side-eye glance from the natives. Our reputations precede us, and this is only one of a million reasons why. An easily earned, happily given 5 stars. *****
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Michael Lewis, the best-selling author of Liar’s Poker, The Money Culture, The New New Thing, Moneyball, The Blind Side, Panic, Home Game, The Big Short, and Boomerang, among other works, lives in Berkeley, California, with his wife and three children.