I approached this book with trepidation. Financial books are not my purview, but the author Michael Lewis had written the massive best-seller “The Blind Side” so I trusted his ability to keep me engaged. His credentials to write a book on the financial industry were established with his first book “Liar’s Poker.” I opened the book and began to read about the stock market, bonds, derivatives and unabashed stupidity.
I was fascinated. I learned that when we talk Wall Street we are usually talking about the bond market. The stock market is heavily regulated and hard to game, the bond market the exact opposite. I learned why AIG was too big to fail. I learned that when you don’t even mention which party is in power, it becomes obvious that saving some of the Wall Street firms became a matter of national interest, and less of a political one.
At the heart, this book is about the sub-prime housing bond market and the credit default swaps. It shows how these products were invented, packaged, rated and sold. At every step along the way, Lewis explains things in a way that allows us without financial knowledge to stay abreast of the terminology. Lewis follows three investors who saw that something was fundamentally wrong with the market, and began to bet that the market would collapse. Usually, the people who make all the money are the bad guys, but, in this case, these were the people who were clearly saying this market would fail, and, yet, those warnings fell on deaf ears.
At page 97, I literally put the book down, and said aloud (to my dog, who was less than interested)- “I GET it now.” And I did. I am no expert in financial matters, and probably know more than I ever want to know about things called tranches, CDOs, and ratings, but I know enough to understand what went wrong.
As we all know, it went very wrong. Michael Lewis lays the blame of the one of the largest financial crises at the feet of the ratings agencies, CEOs who did not know what their traders were doing, and traders who couldn’t see what was wrong with the housing market. Lewis takes us from the late nineties to September 18, 2008, shows us the players and the problems, the financial vehicles that made and lost so much money, and, above all, directs some much needed vitriol to Chairman of the Federal Reserve.
He, by no means, produces the definitive work on the financial crisis; there are many more books to be written, more analysis to be done. As a reader though, I enjoyed this book much more than I thought I would. I spare little sympathy for Wall Street firms and the carnage they sustained as the financial collapse tore through Wall Street. But what happened has implications for everyone, and that is why you should read it.
And now to my rating system:
Buy it NOW!– this is reserved for the best books
Paperback on an Airplane– It’s a good read, but if you leave it in the seat, you won’t be crushed.
Borrow it– From the library or from a friend, that way if you don’t like it or don’t find it especially moving, as I suspect you might, you won’t have spent your hard earned money on it.
Wait for the move– The book is awful, but it might make a great film.
Skip it altogether– I hated it, I think you will too.
For: The Big Short: Inside the Doomsday Machine– I am going with Paperback on an Airplane
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The book is available here.
I am currently reading: The Disappearing Spoon
A friend of mine just lent the book to me. It’s sitting on my desk now. You’ve encourged me to crack it open.
Thanks!
Michael Lewis may well be a better writer than analyst. The style of “Liar’s Poker” was an inspiration to me when I wrote my new book, “Confessions of a Government Man.” I even credited him on my Acknowledgements page for his marvelous sense of humor. I haven’t read “The Big Short” by I will venture that the humor is gone.