Tuesday, November 11, 2008

"Wall Street Had Built a Doomsday Machine"

Ladies and Gentlemen, the incomparable Michael Lewis.

Good to the last drop. Read it all. It's rapturous.

(The only fault I often have with Lewis's writing is that he leaves the impression that everyone who goes to Wall Street ends up wealthy. The truth is that a lot of people on Wall Street never touch the riches. Even among those eligible to get crumbs, the financial press frequently does things like divide total compensation by headcount to print figures like "$1million per employee". My sense is that is so false as to be genuinely unhelpful, with the concentration of the income at the top, almost 90/10...)

Other things to note: Lewis actually uses the names of some of the sub-prime companies in his piece. I'm so tired of see bland charts of "default rates" that make it seem like it all was an act of God, not man-made.


Although it's disrespectful of the author, here are some of my personal favs:

About low-quality companies:

He recited the line from memory: “ ‘The Lomas Financial Corp. is a perfectly hedged financial institution: It loses money in every conceivable interest-rate environment.’
On mortgage companies' printing presses:

In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $720,000.

About synthetics:

"There weren’t enough Americans with shitty credit taking out loans to satisfy investors’ appetite for the end product."

On the indefatigable Merrill Lynch:

“We have a simple thesis,” Eisman explained. “There is going to be a calamity, and whenever there is a calamity, Merrill is there.”

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