This book was a recent selection of the Garrett Planning Network Book Club. I would recommend it to anyone who wants to better understand how the subprime mortgage market and its related derivative securities nearly brought the U.S. banking system to the brink of disaster.
“The Big Short” weaves the stories of those who betted against the subprime mortgage market. The author, Michael Lewis, follows several individuals who studied the market from various angles and decided that at some point the bubble was going to burst. Lewis tells us how they identified the market bubble, and how each of them searched to find someone who could tell them why the market built from mortgages, CDOs, and credit swaps was not a house of cards.
By using quotes and anecdotes, Lewis brings the crisis alive. He describes personality traits of many of the characters to make this book read more like a novel than a non-fiction book. At least, to anyone even slightly interested in markets and Wall Street.
Along with the lessons of the most recent crisis, I found Lewis’ prologue informative and a bit disturbing. Lewis wrote “Liar’s Poker” after the 1987 market crash, and at the time thought that surely the investment banking world would learn from its mistakes. Lewis returns over 20 years later to find that instead, the world he left in disbelief has become even murkier, more corrupt, and self-serving than before.
For a while, I didn’t want to hear any more about subprime. If you’ve moved beyond that stage, or just can’t get enough, you’ll find this book entertaining, informative, and above all, a bit shocking.