My rating: 5 of 5 stars
Amnesia can be a handy ailment. It allows us to forget unpleasant things, such as the stomach-churning world of late 2008, when it appeared the subprime mortgage crisis was going to take the whole financial system — and perhaps the whole civilization — with it. Instead, the markets righted themselves (OK, they had a lot of government help) and here we are, eight years later, and it seems like that time is ancient history.
Unless you lost your house or your retirement, of course.
I hadn’t expected to feel the anxiety of those days when reading Michael Lewis’ “The Big Short.” (I haven’t seen the movie yet, though it’s sitting on my TV stand.) The book is about the handful of investors and analysts who GOT it, who understood that Wall Street had turned into an untethered casino in which even the most respected financial firms had no idea what they were dealing with. Folks like Michael Burry and Steve Eisman realized that bills always come due — whether it’s with the teaser mortgage rates (the “subprime” that gave the game its name) that led working stiffs into buying a home they couldn’t afford, or with the Wall Street firms who repackaged those loans and laundered them into AAA-rated securities, convincing even themselves that the party would go on forever.
Instead, the rates jumped as scheduled. The buyers couldn’t pay and left the banks on the hook. Then the whole system based on this house of cards crumbled and threatened to take down everybody else.
And then the U.S. government made some companies whole and the system survived. It’s allegedly better now — Dodd-Frank and all that — but there’s still a lot of money sloshing around, and even more greed to get at that money.
Who’s to blame? Burry and Eisman, who saw the flaws in the system and made a fortune? The financial firms, who were looking for a new vehicle to maximize profits? The ratings agencies? The government? The home buyers?
What you’ve got is a society and system at cross purposes: a determination to get rich regardless of consequences versus a willingness to invest in the commonweal. The individual vs. the state, the corporation vs. the regulators, secrets vs. trust.
Money vs., well, everything that’s not money.
These are the worlds we created.
Which is what makes “The Big Short” so frustrating. Lewis published the book in early 2010 when we were still dealing with the fallout of the whole mess. More than six years later we’re seeing a different fallout: the continued widening of the gap between rich and poor (or rich and middle class, for that matter). That’s having political repercussions right now — and not just in the U.S.
Still, that frustration isn’t Lewis’ problem. He’s a remarkable writer and, at times, his journalism is unparalleled. I particularly loved a passage describing the workers leaving Grand Central Terminal: “The guys who ran money dressed as if they were going to a Yankees game. … If you saw a buy-side guy in a suit, it usually meant that he was in trouble … The guy in a blazer and khakis was a broker at a second-tier firm. … Danny could guess where people worked by where they sat on the train.”
Beautiful work, there.
So I highly recommend “The Big Short.” Just don’t expect to feel good when you’re done. In fact, perhaps you’ll wish you could have a minor case of amnesia.
(cc’ed from Goodreads)
Update, 5:50 p.m.: I’m reminded of the famous quote by Napoleon, “History is a set of lies that people have agreed upon.” I wonder what he would have made of the subprime financial market.