Customer Review

7 of 8 people found the following review helpful
4.0 out of 5 stars `What kind of people, in which parts of the country, exhibited the highest degree of financial irresponsibility?', 12 July 2010
This review is from: The Big Short: Inside the Doomsday Machine (Hardcover)
We are still living with the consequences of the global financial crisis of 2008. A sad story of losses and losers resulting from the construction and application of flawed mathematical models, untested assumptions and greed. Much has been written about the process of turning subprime mortgages into financial products which were then sold, after being accorded triple A (or equivalent) ratings by ratings agencies. Much is being spent by governments around the world to try to repair the damage. And, hopefully, changes are being made to try to ensure that such disasters are avoided in future.

In this book, Michael Lewis tells the stories of some of those people who analysed the market and saw the possibility that instruments created on the foundation of subprime mortgages could fall. In such circumstances, going short could reap a fortune.

So, how did these people know this? Were they prescient, or just lucky? Maybe both: together with the fact that they undertook some analysis of the subprime mortgages and realised that the facade was rotten. Who were these people? Mr Lewis writes about Steve Eisman and his team, who understood the US housing market and Wall Street. He writes of Michael Burry, who immersed himself in the bond market, and of the `garage band hedge fund' created by Jamie Mai and Charlie Ledley.

I found this book interesting because it sheds light on a different aspect of the crisis. Its discomforting to think that while some individuals undertook the analysis required to determine an opportunity for profit, the multiple entities involved in the subprime mortgage financial path (from lending money initially to manufacturing the financial products sold as a consequence) did not undertake appropriate risk analysis. And now, sadly, individuals and taxpayers are bearing the cost.

`Success was individual achievement; failure was a social problem.'

Jennifer Cameron-Smith
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