Latest read: The Big Short

Credit default swaps — those infamous three words: The Big Short: Inside the Doomsday Machine by Michael Lewis is a fast-paced, right-to-the-point story about CDS and the collapse of Wall Street.  While recent best sellers have addressed big players and multiple companies involved in the crash Lewis’s focus is just credit default swaps, how they were born, who made millions and how American taxpayers got burned in the end.

Criminal insanity with a slice of reality over a ton of F-bombs.  I found it hard to put down and actually ripped through the book in a single night.

Lewis follows the few hedge fund managers who actually predicted the collapse, how they managed to bide their time and padded their wallets by betting against subprime loans.  Crowdsourcing at it’s best….or worst?

Steve Eisman, Michael Burry, and Howie Hubler all have interesting roles in the credit swap and collapse (among others) that combine to document how greed, pure greed and outright criminal theft led to the economic collapse of financial giants and ruined our country.

Steve Eisman was blunt — to say the least when insulting financial CEOs but he was right all along about the coming collapse.

Why didn’t others listen to him?  Maybe its how the game is stacked to reward the few and control the governing agencies.  Wall Street views S&P and Moody’s as the guys unable to survive at a brokerage so they work outside the real game.  Lewis has much more to show how the game is stacked for the wealthy and against middle America and especially the poor.

Maybe the best part was his explanation of how Wall Street actually pays S&P and Moody’s for their credit ratings….

Hubler made the worst trade in the history of Wall Street. He lost $9 Billion on a single trade for Morgan Stanley.  And yet he was permitted to leave with a $100 million bonus.  $9 B I L L I O N and he walks unscathed?  Lewis briefly touches on how his actions were covered up by Morgan Stanley and buried from the light of day.

Whats worse? A farm worker in California earning $14,000 is approved a subprime to purchase a house for $768,000.  A stripper in Vegas and full time baby sitter in Manhattan have been manipulated to hold multiple six-figure properties that neither could ever hope to pay off.  But their financial institutions pushed them down the rabbit hole with stories of easy, affordable financing…

While going through Stanford medical school Michael Burry discovered he had a better talent for bond market research. More importantly he understood how to bet against risky consumers suckered into “teaser rates” on subprime loans.  He dropped out of medical school and started his own investment company.  He just had to advise his clients to hold onto investments for more over two years as those subprime mortgage adjustments expired and skyrocketed Americans into default.  In betting against the success of them he won big….really big.

Maybe the best example of how criminal Wall Street is was how Goldman Sachs had someone selling credit default swaps to a company and then actually betting against that company’s ability to repay the swap back to Goldman.  He walked with a personal bonus of 1 BILLION dollars:

I’m impressed with Lewis’ storyline: Wall Street sold bullshit products to screw poor people – plain and simple.  Cannot see anyone reading this book actually taking a stand that Wall Street does NOT need serious reform.  Criminal insanity with a slice of reality over a ton of F-bombs.