Published by W. W. Norton & Company on February 25th 2011
The #1 New York Times bestseller: "It is the work of our greatest financial journalist, at the top of his game. And it's essential reading."—Graydon Carter, Vanity Fair
The real story of the crash began in bizarre feeder markets where the sun doesn't shine and the SEC doesn't dare, or bother, to tread: the bond and real estate derivative markets where geeks invent impenetrable securities to profit from the misery of lower- and middle-class Americans who can't pay their debts. The smart people who understood what was or might be happening were paralyzed by hope and fear; in any case, they weren't talking.
Michael Lewis creates a fresh, character-driven narrative brimming with indignation and dark humor, a fitting sequel to his #1 bestseller Liar's Poker. Out of a handful of unlikely-really unlikely-heroes, Lewis fashions a story as compelling and unusual as any of his earlier bestsellers, proving yet again that he is the finest and funniest chronicler of our time.
By Dr. Fahid Qurashi
This is one of the best books I have read on the 2007 financial crash. It details the build-up and the aftermath of the crash, and the key movers (individual and institutional). The book does a great job of conveying the complexity of the industry, so that the reader can understand the key components of the crash: mortgage bonds; credit default swaps (CDS); collaterised debt obligations (CDO); tranches; long and short bets; and the role of the ratings agencies etc.
The housing crisis was the product of a relationship between banks, insurance companies, real estate agents, and rating agencies who conspired to give risky mortgage loans to people that couldn’t afford them and were likely to default. When enough of these risky mortgage loans were created, they were bundled together (into mortgage bonds and collaterised debt obligations) and sold as investment opportunities (e.g. to pension funds). After a couple of years when lenders began defaulting on the mortgage loans the market crashed and investors, banks, and insurance companies lost billions of dollars. Some investors and hedge fund managers who foresaw the inevitable crisis bet against the housing market (with credit default swaps) and made billions of dollars on the misery of millions of families that lost their homes.
The one criticism I have of the book is that it gives the impression that the crash was the product of a combination of stupidity, greed, limited regulation, and hubris. It has to be read alongside other works on neoliberal capitalism (e.g. David Harvey’s A Brief of Neoliberalism) to appreciate the deliberate political nature of the economic crash – as a means to further entrench neoliberalism, transfer wealth from the 99% to the 1% (via numerous bailouts and rounds of quantitative easing), shrink the state via austerity measures and cut social welfare provisions, undermine wages, solidarity and unionisation. For David Harvey, this is the aim of neoliberalism as a political project of class power that aimed to restore the power lost by the 1% after World War II.
In the movie, towards the end, Steve Eisman’s character says ‘they [banks] knew’ they’d be bailed out. And I think that is true. It wasn’t an accident.0