The Big Short: Inside the Doomsday Machine - Michael Lewis

Oliver Stone's Wall Street hit the screens toward the beginning of my Advanced Placement career. The arguments we had over that movie never failed to infuriate me. Most AP classes divide themselves into two types of kids. There are the bleeding heart liberal arts types who are taking the class because they love literature and there are the rapacious conservative types (you know, the ones who remind you of King Lear's oldest daughters) who are taking the class so they can get enough college credit to avoid having to fuzz up their brains with literature and the like in college.

The conservative types adopted Gordon Gecko's motto, "Greed is good," as a kind of mantra. The arguments were fun, but I always ended up feeling a little sad about misguided youth. Of course, I should hasten to add that I was the president of Loveland High School's TAR (Teen Aged Republicans) when I was a rapacious senior myself. I even remember a wonderful classroom debate in American Problems where I laid waste all of the commie loving free speech movement types with my devastating arguments lamblasting the hippy freaks protesting at Cal-Berkeley. I have grown up since then.

You know the old saw that says "if you aren't a liberal when you are young, you have no heart; if you aren't conservative when you grow older, you have no brain?" I've always thought that statement was backwards. I loved Ayn Rand when I was in high school. So did all of my friends on the forensics team. Now, I can't imagine how anyone past their 18th birthday could stomach a word of Rand's myopic didacticism. I mean on a scale of deep thinking, Anthem is at least two notches below Jonathon Livingston Seagull and the poetry of Rod McKuen. Atlas Shrugged makes up for its lack of profundity by offering horribly convoluted sentences that give young readers the illusion they are into something "heavy." As for Fountainhead, the question is not how well a thing is done, but why.

Reading Michael Lewis' The Big Short brought back all of those memories. All of the people Lewis follows through the financial catastrophe of the past few years and Lewis himself are carbon copies of my Gordon Gecko loving seniors all those years ago. Smart, witty, incredibly quick on their feet, good testers, and complete assholes. Just the types who would delight in making fortunes while conspiring to bring down the economy just so they could have the satisfaction of saying "I told you so!"

His book, a well documented chronicle of the short selling antics of a handful of very smart men, reads more like fiction than fact. It follows the short sellers as they first begin to realize the disaster created by credit default swaps and collaterized debt obligations (CDOs)waiting to happen on Wall Street and eventually, since no one will believe their Cassandra-like prophecies of doom, they begin to take advantage of this unbelievable situation by shorting everything with a pulse (or a stock market tick).

Of course as the economy tanks from the sheer weight of the collective greed and stupidity of supposedly bright ivy league educated MBAs, these short sellers make hundreds of millions of dollars. The fact that they made this fortune on the backs of americans who were basically coerced into taking out housing loans they could never repay doesn't seem to bother them. After all, they weren't the ones who devised variable rate mortgages as a money making machine, they just took advantage of it.

I keep promising myself that I will stop reading all of these muckraking books about the economy, but I can't help it. Besides, this one is the best of the lot. Either because Lewis is so good at explaining, or I have read so much about the subject that it has finally sunk in, the book has made me fairly confident that I could walk into a party and hold up my end of any conversation about iffy financial schemes based on the housing market. Of course, why would anyone in their right mind want to go to a party like that. The hors d'ouevres would probably be really good.

However, I am still trying to get my non-financial head around the idea that Wall Street, combined with a corporation friendly propensity toward non-regulation, created financial gimmicks designed solely to take advantage of poor people who wanted a place to live just so Goldman-Sachs could make a whole shit load of money, but they did! I mean shorting a company like Lehman Brothers, for example, was the equivalent of me taking out an insurance policy on my neighbor's house just after I noticed that it was on fire. The thing that is amazing is that there was no shortage of companies willing to sell such a policy. It was a giant Ponzi scheme that worked beautifully until house values stopped rising and the chickens came home to roost.

Lewis ends his masterful work by asserting that the ties between Wall Street and Washington are so strong that any attempt at regulation will certainly not be adequate and we will simply be setting ourselves up for the next time unregulated greed runs amok.

I'm going to read the book again. I'm sure it gets funnier.