The Big Short

by Michael Lewis

 

I think I was meant to like this book, for several reasons. First of all, I have read a couple of Lewis’ other books, The Blind Side and Moneyball. Both were excellent, and yes, I am the type of hipster that will tell you I read the books before the movies came out. (I never saw The Blind Side and I thought Moneyball was good, but not great; both films received Oscar nominations for Best Picture.) Lewis was able to blend histories of football and baseball with the personal stories of Michael Oher and Billy Beane to make entertaining, informative, and at times touching books.

I’m fascinated by Wall Street culture, at least as portrayed in films such as Wall Street and American Psycho, and I was hoping to see a bit of that and how it played into the subprime mortgage crisis. Although I sympathize with anti-Wall Street protests, it’s still fun to get a peek at their world. I mean, you don’t need to like gangs to enjoy The Sopranos or The Wire. Gordon Gekko is a great character, even though I hate what he stands for.

I was also curious about the collapse of the economy, which I blame for not having a good job and for everything else I don’t like about my life. I paid attention to the news a lot in 2008, and I still didn’t really have a clue as what set it off, how and why the government got involved, and how I would be affected. If anyone could explain it all in a way that I could understand, it would be Michael Lewis.

Well, The Big Short did show the Wall Street hubris I had been expecting (though I think that Lewis’ 1989 semi-memoir Liar’s Poker would have more of this). It also did an excellent job of explaining the crisis in a way that any idiot, like me, would understand. Essentially, the book tells the story of what happens when banks give home loans to people who almost certainly won’t be able to pay them back. The loans are packaged together and sold as a bond, which contains some loans that will be worthless and some that will be paid. This bond is then chopped up, combined with others, and sold as a CDO to disguise the fact that they often contained bad investments. Banks and huge Wall Street firms soon got knee-deep in other wacky derivatives that were so far removed from what they represented that investors never realized it was a house of cards. If you want an explanation that wasn’t written by an idiot, The Big Short should be very helpful. Though I had to refer back to Lewis even for my weak summary, I can assure you that I understand the economics of the crisis much better than I did before.

Understanding all these obscure financial concepts is never the problem here. The problem is that Lewis tells the story by focusing on the handful of people who saw the crisis for what it was and decided to bet against the subprime mortgage machine, directly and indirectly. Some are insiders, some are not, and some are more likeable than others. For me, just keeping them straight was hard, and I kind of wish Lewis had stayed away from their personal lives and focused on their involvement with the market. I never developed an emotional connection with any of them, and I think it doesn’t help that all were making money off of an apocalyptic scenario. Some of Lewis’ protagonists even admit this as well: all were feeding the doomsday machine and stood to profit substantially when the machine finally broke down.

I get it, or I think I do, that Lewis chose these people as the subjects of The Big Short because they were the only ones to see the mess coming, the only ones so confident that they were right that they were willing to put their money, hundreds of millions of dollars, where their figurative mouths were. They are not, however, the ‘good guys’. That they were right does not change the fact that they made money while failing to prevent millions of homebuyers from being taken advantage of. Perhaps if Lewis had included some of the 99% in the book, it would have had the emotional anchor that made his other work special.

If you want to understand the subprime mortgage crisis, this account is superb; seriously, if you’re curious at all, read it. But I don’t think they’re going to make it into a movie anytime soon.

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3 Comments

  1. Pingback: Boomerang | Bored and Literate

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