The Big Short (The Book The Movie is Based On) by Michael Lewis (Reviewed)

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After seeing the theatrical version twice I decided to read Michael Lewis’ superb non-fiction account of governmental/and/corporate greed run-amok that just nearly devastated our national economy back in 2007/2008.  After reading the book, I saw the movie another two times- hey, it’s been playing at the $3 theater for a couple weeks, so it’s been easy!

81wBzBcSclLHaving read The Big Short makes now about three or four books I’ve read in a row on the topic of governmental and corporate fraud. I read Too Big To Fail by Andrew Ross Sorkin, Griftopia by Matt Taibbi, All The Devils are Here by Bethany McLean, as well as having read some time ago The Divide by Matt Taibbi.  Having no real investment experience myself, and not being much of a “business” guy, I still find myself fascinated by these true stories of corruption and greed at the highest levels.  In many ways, sadly, I find that there is an underlying similarity in this topic with my favorite issue: wrongful convictions.  What’s the through line, what’s the similarity?  Answer: human nature.  Human flaws, human sin, human selfishness, human greed, the all too often replicated examples of absolute human self-conviction about something that turns out to be simply wrong.  As is quoted to so much effect in the film: “It ain’t what you don’t know that gets you into trouble. It’s what you know for sure that just ain’t so” – Mark Twain.

We’re humans, we get it wrong… time and time again.  And as these books detail, when you give just about anyone a bit of power or influence… we tend to abuse that power or influence to the extent to which that power or influence allows, or is allowed by nature, or by God for our own ends.  We’re self-interested, and not in the “good” way Smith’s invisible hand would have us believe.  This is how I see it, at least.

The book is every bit as good as the film, and if you’re at all interested in what you saw in the film, then you will find the book to be a clear presentation of the same story, though with substantially more detail, not only in relation to the protagonist’s lives, but also in the financial, political, and legal elements of the crimes committed against the American people and others.

Michael Lewis is a lucid writer who does a very good job explaining what could be considered very complex financial contraptions that Wall Street devises almost for the very purpose of being enigmatic and indecipherable. As is said in the film, they want you to believe that you’re not smart enough to do what they do, which in an ironic way, is the moral undercurrent of the entire mortgage bubble meltdown.

cblog_e865c5a319-thumbcAs much as I enjoyed Michael Lewis’ writing, I still most highly recommend Matt Taibbi’s work in both Griftopia and The Divide, both books dealing directly and indirectly with this same issue. The core problem, as Taibbi brings out best, is human nature, of course. Human greed outweighing fairness, common decency, and ultimately, honesty, is ultimately the axis upon which the whole thing teeters to collapse.

maxresdefaultFor those of you who don’t typically read this type of material, all I can say is: please see the film The Big Short.  It’s a masterful work.  It’s a true story, and it will educate you!

 

 

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Here’s some random quotes from the book:

Free money for capitalists and free markets for everyone else” … “plus the more or less instant rewriting of financial history vexed all sorts of people.”

“The world’s most powerful and highly paid financiers had been entirely discredited, without government intervention, every single one of them would have lost his job.  And yet those same financiers were using the government to enrich themselves.  I can understand why Goldman Sachs would want to  be included in the conversation about what to do about wall street, what i can’t understand is why anyone would listen to them.” (Attributed to Michael Eisman)

In Eisman’s view, the unwillingness of the US government to allow the bankers to fail was less a solution than a symptom of a still deeply dysfunctional system.  The problem wasn’t that the banks were in and of themselves critical to the success of the US economy. The problem, he felt certain, was that some gargantuan unknown dollar amount of credit default swaps had been bought and sold on every one of them.  There’s no limit to the risk in the market, he said, a bank with a market capitalization of 1 billion dollars might have 1 trillion dollars worth of credit default swaps outstanding no one knows how many there are and no one knows where they are.  

The main effect of turning a partnership into a corporation was to transfer the financial risk to the shareholders. When things go wrong it’s [the shareholders] problem, he said, and obviously not theirs alone. When the wall street investment banks screwed up badly enough, its risks became the problem of the United States government. “It’s laissez faire until you get into deep s**t,” he said, with a deep chuckle. …He was out of the game. It was now someone else’s fault.

 

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