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Michael Lewis profiles the nervy investors who made a fortune from the financial crisis 

Wednesday, Apr 7 2010

I'm still trying to get my head around this. Brad Pitt bought the movie rights to this book? Really? I mean, sure, bestselling Berkeley author Michael Lewis is hotter than ever these days, with The Blind Side just having scored Sandra Bullock an Oscar, and Moneyball, also a Pitt project, back on track for production.

But that doesn't mean a film version of The Big Short could work — because for starters, as Lewis himself concedes, "How do you explain to an innocent citizen of the free world the importance of a credit default swap on a double-A tranche of a subprime-backed collateralized debt obligation?" It seems like lots of snappy dialogue including directly quoted variations on "What the fuck?" and "Holy shit!" won't entirely cover it.

Even the book's title and subtitle together don't manage to tell us directly what it's about. In fact, The Big Short: Inside the Doomsday Machine is a selective survey of America's recent financial crisis — and, more specifically, a group portrait of a handful of investors who saw it coming and made it worse by betting big money on the collapse of the subprime mortgage market. That is, they had the wherewithal and the financial schadenfreude to build systematic profit from other people's losses. (It will be helpful to know going in that The Big Short is a book in which the Wall Street buzzword "short" functions as noun, verb, adjective, and abstruse philosophical concept.)

These peculiar and variously antisocial individuals included the perpetually gape-mawed FrontPoint hedge fund honcho and Spider-Man enthusiast Steve Eisman; Scion Capital's one-eyed, Asperger's-afflicted Michael Burry; Cornwall Capital Management cofounders Charlie Ledley and Jamie Mai, who spent two years in a shed behind a buddy's Berkeley house trumping up tens of millions; and Deutsche Bank's Greg Lippmann, or "Fucking Lippmann" as he was known to one associate, on account of being a guy from whom you'd never buy a car but somehow would buy $500 million worth of credit default swaps.

Not only did these guys see through the rickety foundations of subprime mortgage bonds, they also saw how to insure themselves for a payout from the inevitable tsunami of loan default. They made themselves rich. They made themselves sick. They discovered Vegas strippers and their own immigrant servants to be buried in home-equity loans. They even tried to warn people that this state of affairs was borderline-apocalyptic. And in that they failed.

Lewis brings them all vividly to life, although he is less successful at explaining what they were talking about. They were talking about a financial infrastructure built by clever and greedy people to profit from people less clever and less greedy, perhaps, but nonetheless inclined to live beyond their means. This required elaborate financial instruments so successfully designed to obfuscate investment risk that the designers themselves lost sight of the risk. "What are the odds that people will make smart decisions about money if they don't need to make smart decisions," he writes, "if they can get rich making dumb decisions?"

If The Big Short seems confused about whether it's explaining the story to someone who doesn't understand it or gossiping about it with someone who does, at least it's less confused than the rest of us. And if it seems less useful as a reference text than as an early-draft allegory, that's deliberate. "Each of these people told you something about the state of the financial system," Lewis writes, "in the same way that people who survive a plane crash told you something about the accident, and also about the nature of people who survive accidents." Let alone the journalists who cover them.

As Michael Moore's Capitalism: A Love Story was to Roger and Me, so Lewis' new book is to Liar's Poker, his own auspicious 1989 debut: less a mature and necessary sequel than a skillfully seized I-told-you-so opportunity. Is that why Brad Pitt wants in on it?

About The Author

Jonathan Kiefer

SF Weekly movie critic Jonathan Kiefer is on Twitter: @kieferama and of course @sfweeklyfilm.


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