Friday, May 25, 2012

The Big Short - Michael Lewis

Don't lie to me, you opened this post (or maybe some people didn't even get that far) and were tempted to just keep on walking.  I understand.  There aren't many people I know in the blogging world that have any desire at all to read about the financial crisis.    


But wait!  This is written by Michael Lewis, author of "The Blind Side", "Moneyball" and "Liar's Poker".  He is proven when it comes to writing a non-fiction book that appeals to all.  So don't go anywhere.  Read this for entertainment value if you will.


Combine the Michael Lewis effect with the fact that sadly, the financial crisis that brought Wall Street, the US, and ultimately the world to it's knees in 2006 and onward is a tragedy that we cannot ignore.   We are still living in the dung pile that was made by investment banks, mortgage lenders, the bond credit ratings agencies, and the government.  The effect has been insidious...homes are worth half of what they were five years ago, every neighborhood has a property or two with knee-high weeds in the yard and are in foreclosure, the unemployment is at an all-time high.  This was Armageddon like we've not seen since The Great Depression.  


I suppressed a groan when I learned we would be reading this book for the Heathrow Literary Society, but at the same time, I felt that to remain ignorant of the facts was irresponsible.  This was going to do me good.


I won't bore you with the details...Michael Lewis does a much better job at explanations.  He boils it down the best he can, still it is quite complicated.  He describes the massive movement to put higher credit risk people in homes, and the creation of the "sub-prime loan" which was always shaky at best.  To spread their risk, investment banks creatively compiled these toxic loans into beautifully wrapped packages that were disguised and rated as a good investment, when really it was a house of cards.  


What was just pure, good fun in this book were the personal stories.  Lewis profiles various characters that worked in the investment markets...a brilliant neurosurgeon with Asperger's who hid in his office and obsessively mastered the markets and the art of investing, an abrasive, wild hedge fund manager whose mouth had no filters, two unpolished college grads who couldn't get a proper job and started investing out of a garage...all of these larger-than-life individuals SAW what was coming.  Long before the professionals did.  They were like action heroes in this book.  I was in awe.


To read about the chain of events that led to Doomsday is baffling.  Mind-blowing.  It is like the entire world lost their freaking mind.  A non-English-speaking migrant worker with an income of $14,000 who bought a house for $724,000.  A Vegas stripper who owned five properties.  Something for nothing!  Free money for everyone!  High octane investment bankers who had created a derivative so complicated, few people understood it.  But hey, they were making billions of dollars, so what the hell!  Live it up, and sell, sell, sell!


At our book club, those who read the book (most that did had backgrounds in finance), there was emotion and anger.  It is hard not to be enraged at the lack of consequences for those executives at the top of the food chain.  It is hard not to want to move to Bali when you understand how the political goons used Fannie Mae and Freddie Mac to start the whole avalanche in the first place.  


But the small attendance at the meeting was telling.  Most didn't have the stomach for it.  I am the target audience...I am a CPA and my husband is knee-deep in the business.  This man I love came home EVERY NIGHT FOR A YEAR AND A HALF raving about this debacle.  Reorganizing our debt, moving money around, and damn near burying Mason Jars full of cash in the backyard.  I had Wall Street at my dinner table more times than I care to admit.  That being said, I had a hard time really grasping the enormity and complexity.  After earnestly digging into the book however, I was gripped.  I Googled.  I watched documentaries.  I read articles.  I consider myself enlightened and invigorated for having read this book.


Note:  I threw my normal review format in the trash for this one.  This book was in a league all by itself.




4.5 out of 5 stars   


  

16 comments:

Jackie Bailey said...

I have to admit that I don't know that many details about the financial crisis, but your review is making me want to know more. Anything that has the power to make people angry must be good. Thanks for drawing it to my attention.

bermudaonion said...

I know I should read this one but I'm not sure I want to. There's nothing I can do about it, so I prefer to keep my head in the sand.

Jenny said...

Actually this topic fascinates me! I actually have really been wanting to read this, but I want to read Liar's Poker first which is on hold for me at the library. Would you recommend reading that first or does it not matter at all? Because if not, I might go straight to this one. I didn't know you were a CPA... that was what I wanted to do back before I decided to go into social work and then mental health therapy, LOL!

rhapsodyinbooks said...

My husband loves loves loves Michael Lewis. Jim went to U. of Chicago so of course he is totally obsessed with economics and with writers having a good understanding of it, so if he loves Michael Lewis I assume they are at least as theoretically sound (according to the Chicago School anyway) as they are interesting! But me, ummm, I'll probably stick to werewolf books (instead of books about blood-sucking corporate vampires, for example).

Zibilee said...

You know our story of almost losing our home when the meltdown occurred, so this book would be excellent to share with my husband, who is not an economics major, but feels the need to understand just what the hell happened out there. I mean, we know the gist of things, but to get this peek into the behind the curtain shenanigans would really be something we would love to read. Your review says it all. Angering. Enlightening. Frustrating. Great review.

Melissa (Avid Reader) said...

You caught me with your first line. I was about to skim the review, but you made me actually read it... and now I want to read the book. Well played Sandy.

annieb said...

I have been very interested in this subject since seeing the documentary Inside Job and because of real life, of course. I live in Nevada which was hit extremely hard by the recession (that title just slays me; seems so benign)so I have seen it up close and personal. I will get this book and read it, but may I say that the people who should be reading these things and thinking about this problem are the least likely to do so. There is also the fact that, ultimately, people like us can't do anything anyway unless there are many, many more of us that demand accountability and reform. Lawrence Lessig's Republic Lost is another book that relates to the economic crisis and goes even further with laying blame at the feet of Congress and the lobbyist system. Great review, by the way.

caite said...

[[[moving Mason jars from backyard}}

lets us not forget that a lot of ordinary people are to blame for all this too, people that ignored common sense and got in so much dept because they just must have the huge house, the second car, the big vacation..all on credit cards and loans. Should thy have been loaned that money, given those cards? NO, but they are responsible for what they did too.

Peppermint Ph.D. said...

Gulp, do I admit to you that I don't balance my checkbook on a regular basis? Whoops, I guess I just did. My husband, however, knows where every penny we have is, has been and will go to. I'm not proud of my lack of money management, not to mention my over-use of credit cards in the past. But, I've become a different person in the last few years, actually scared out of my wits, that without much saved, what would we do should everything around us fell apart? I know that's dramatic but geez, at this point this crisis is realistically dramatic. We've got 3 kids to get through college. I've become much more careful with what I spend, and I don't even carry a credit card anymore. What I think this book probably does more than anything is show the rest of us how we sit around trusting those big guys with our money, thinking they're going to be able to bail us out, when in reality their cups are empty now as well. We have some kindof sense of false security; however, when the chips are down, the big guys are going to cover their own butts before they reach out to cover us. We're much better off doing everything we can to be self-sustainable on our own backs and our own dollars.
See, I just told myself that I need to read this book...decision made :)

Jenners said...

Thank you for this. I need to read this. Just one question: print or audio? I wasn't sure how you read it? I'm guessing print?

Tasha B. said...

My mom works in a bank (actually a credit union), and in 2001 she was saying allowing banks to speculate would lead to a financial collapse. It's really only common sense. Yet the law banning it that FDR put in place as part of the New Deal still hasn't been renewed. I guess as long as some people are making money... :[

Ryan said...

You had me at "Michael Lewis..."

Julie P. said...

Insane, right? Truth is stranger than fiction.

The Bumbles said...

I work for a Financial Planner. When he went into surgery for cancer and was completely unavailable for 2 weeks, the market crashed. Guess who had to handle scared investors by herself? Moi. Thankfully, our clients were already properly positioned for their retirement and risk. But that didn't mean they weren't freaking out to make sure. I would love to read this book. That entire situation really pissed me off. Greed. Preying on ignorance. And ignorance leading to the screwing over of all levels of financial sophistication. Grrr!!! Great review!

Melissa said...

I love well done non-fiction, and while I'm not terribly interested in financial things, your review did catch my attention.

Kathleen said...

We all need to read this. It is our lack of understanding about what the government and banks were doing that helped us into this mess. Now that we are more aware I'd like to think we can do something about it but I think we are going to be living with this mess for years to come.