Review: The Big Short by Michael Lewis

The moral of this story is that people will see what they are paid to see and that if they are incentivized not to see the truth, they won't. That was the situation described by Michael Lewis. It was the experts who failed us again. It was one guy with Asperger's Syndrome (which may have given him a huge advantage since the condition does help one to focus intensely) who realized that the banks, in making negatively amortized mortgages, were creating a situation to would inevitably fail. He decided to bet against it, was right, and made billions through the use of the banks own creations: the credit default swap, which is basically an insurance policy that pays off big if a bet goes south.

Goldman Sachs, virtual lone survivor of the meltdown thanks to its friends in government, persuaded AIG to insure billions of the subprime mortgages. That was to their downfall. They never did their homework. Nor did the rating agencies. Nor did the regulators.

"People who create disasters make a lot of money cleaning up the disasters because they are the only ones who know about the disasters." The current system is a very elegant form of theft. Basically, Wall Street could care less about investors and is only interested in getting the maximum number of fees. Alan Greenspan is labeled as the worst Fed chair ever, having kept money way too cheap for too long, and ignoring the whole sub-prime mortgage problem thinking, in good libertarian form, that it was none of his business.

The big question is, have what have we learned from this debacle? I suspect nothing. Especially when I hear big wigs predict future financial meltdowns within 5-10 years. Ultimately, Lewis believes that Wall Street has divorced itself from American society and may have done itself in. Soon, as people learn that brokers are encouraging investment in stocks which their own firms might be betting against, customers will learn of the conflict of interest and their world will come tumbling down. It's not a pretty picture. The hatred of Wall Street and its minions is palpable outside NY and Washington. It elected Trump who has learned nothing, instead subscribing to Wall Street's code of doing nothing unless it benefits itself, and falling for its sycophancy. Whether that will ultimately unhinge him remains to be seen.