The Big Short Quotes

“I really do believe the final act in play is a crisis in our financial institutions, which are doing such dumb, dumb things,”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“One of the reasons Wall Street had cooked up this new industry called structured finance was that its old-fashioned business was every day less profitable. The profits in stockbroking, along with those in the more conventional sorts of bond broking, had been squashed by Internet competition.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“The creation of the mortgage bond market, a decade earlier, had extended Wall Street into a place it had never before been: the debts of ordinary Americans.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“I have a job to do. Make money for my clients. Period. But boy it gets morbid when you start making investments that work out extra great if a tragedy occurs.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“On its surface, the booming market in side bets on subprime mortgage bonds seemed to be the financial equivalent of fantasy football: a benign, if silly, facsimile of investing. Alas, there was a difference between fantasy football and fantasy finance: When a fantasy football player drafts Peyton Manning to be on his team, he doesn’t create a second Peyton Manning. When Mike Burry bought a credit default swap based on a Long Beach Savings subprime–backed bond, he enabled Goldman Sachs to create another bond identical to the original in every respect but one: There were no actual home loans or home buyers. Only the gains and losses from the side bet on the bonds were real.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“The “consumer loan” piles that Wall Street firms, led by Goldman Sachs, asked AIG FP to insure went from being 2 percent subprime mortgages to being 95 percent subprime mortgages. In a matter of months, AIG FP, in effect, bought $50 billion in triple-B-rated subprime mortgage bonds by insuring them against default.”
― Michael Lewis, The Big Short

“Only someone who has Asperger’s would read a subprime mortgage bond prospectus,”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“Eisman was quick to see narratives, he explained the world in stories, and this was one of the stories he used to explain himself. The”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“not because he had the slightest interest in God but because he was curious about its internal contradictions.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“The less transparent the market and the more complicated the securities, the more money the trading desks at big Wall Street firms can make from the argument. The constant argument over the value of the shares of some major publicly traded company has very little value, as both buyer and seller can see the fair price of the stock on the ticker, and the broker’s commission has been driven down by competition. The argument over the value of credit default swaps on subprime mortgage bonds—a complex security whose value was derived from that of another complex security—could be a gold mine.”
― Michael Lewis, The Big Short

“I hated discussing ideas with investors,” he said, “because I then become a Defender of the Idea, and that influences your thought process.” Once you became an idea’s defender you had a harder time changing your mind about it.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“Why, for example, wasn’t AIG required to reserve capital against them? Why, for that matter, were Moody’s and Standard & Poor’s willing to bless 80 percent of a pool of dicey mortgage loans with the same triple-A rating they bestowed on the debts of the U.S. Treasury? Why didn’t someone, anyone, inside Goldman Sachs stand up and say, “This is obscene. The rating agencies, the ultimate pricers of all these subprime mortgage loans, clearly do not understand the risk, and their idiocy is creating a recipe for catastrophe”?”
― Michael Lewis, The Big Short

“The financial markets paid a lot of people extremely well for narrow expertise and a few people, poorly, for the big, global views you needed to have if you were to allocate capital across markets.”
― Michael Lewis, The Big Short

“The rating agencies, who were paid fat fees by Goldman Sachs and other Wall Street firms for each deal they rated, pronounced 80 percent of the new tower of debt triple-A.”
― Michael Lewis, The Big Short

“If you are going to start a regulatory regime from scratch, you’d design it to protect middle-and lower-middle-income people, because the opportunity for them to get ripped off was so high. Instead what we had was a regime where those were the people who were protected the least.” Eisman”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“These folks don’t know what they’re talking about. If losses go to ten percent there will be, like, a million homeless people.” (Losses in the pools Hubler’s group had bet on would eventually reach 40 percent.)”
― Michael Lewis, The Big Short

“Whenever Wall Street people tried to argue—as they often did—that the subprime lending problem was caused by the mendacity and financial irresponsibility of ordinary Americans, he’d”
― Michael Lewis, The Big Short

“The line between gambling and investing is artificial and thin. The soundest investment has the defining trait of a bet (you losing all of your money in hopes of making a bit more), and the wildest speculation has the salient characteristic of an investment (you might get your money back with interest).”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“From the end of 2005 until the middle of 2007, Wall Street firms created somewhere between $200 and $400 billion in subprime-backed CDOs: No”
― Michael Lewis, The Big Short

“To the untrained eye, the Wall Street people who rode from the Connecticut suburbs to Grand Central were an undifferentiated mass, but within that mass Danny noted many small and important distinctions. If they were on their BlackBerrys, they were probably hedge fund guys, checking their profits and losses in the Asian markets. If they slept on the train they were probably sell-side people—brokers, who had no skin in the game. Anyone carrying a briefcase or a bag was probably not employed on the sell side, as the only reason you’d carry a bag was to haul around brokerage research, and the brokers didn’t read their own reports—at least not in their spare time. Anyone carrying a copy of the New York Times was probably a lawyer or a back-office person or someone who worked in the financial markets without actually being in the markets. Their clothes told you a lot, too. The guys who ran money dressed as if they were going to a Yankees game. Their financial performance was supposed to be all that mattered about them, and so it caused suspicion if they dressed too well. If you saw a buy-side guy in a suit, it usually meant that he was in trouble, or scheduled to meet with someone who had given him money, or both. Beyond that, it was hard to tell much about a buy-side person from what he was wearing. The sell side, on the other hand, might as well have been wearing their business cards: The guy in the blazer and khakis was a broker at a second-tier firm; the guy in the three-thousand-dollar suit and the hair just so was an investment banker at J.P. Morgan or someplace like that. Danny could guess where people worked by where they sat on the train. The Goldman Sachs, Deutsche Bank, and Merrill Lynch people, who were headed downtown, edged to the front—though when Danny thought about it, few Goldman people actually rode the train anymore. They all had private cars. Hedge fund guys such as himself worked uptown and so exited Grand Central to the north, where taxis appeared haphazardly and out of nowhere to meet them, like farm trout rising to corn kernels. The Lehman and Bear Stearns people used to head for the same exit as he did, but they were done. One reason why, on September 18, 2008, there weren’t nearly as many people on the northeast corner of Forty-seventh Street and Madison Avenue at 6:40 in the morning as there had been on September 18, 2007.”
― Michael Lewis, The Big Short

“Subprime mortgage lending was still a trivial fraction of the U.S. credit markets—a few tens of billions in loans each year—but its existence made sense, even to Steve Eisman. “I thought it was partly a response to growing income inequality,” he said. “The distribution of income in this country was skewed and becoming more skewed, and the result was that you have more subprime customers.”
― Michael Lewis, The Big Short

“The subprime mortgage machine was up and running again, as if it had never broken down in the first place. If the first act of subprime lending had been freaky, this second act was terrifying. Thirty billion dollars was a big year for subprime lending in the mid-1990s. In 2000 there had been $130 billion in subprime mortgage lending, and 55 billion dollars’ worth of those loans had been repackaged as mortgage bonds. In 2005 there would be $625 billion in subprime mortgage loans, $507 billion of which found its way into mortgage bonds.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“Household was making loans at a faster pace than ever. A big source of its growth had been the second mortgage. The document offered a fifteen-year, fixed-rate loan, but it was bizarrely disguised as a thirty-year loan. It took the stream of payments the homeowner would make to Household over fifteen years, spread it hypothetically over thirty years, and asked: If you were making the same dollar payments over thirty years that you are in fact making over fifteen, what would your “effective rate” of interest be? It was a weird, dishonest sales pitch. The borrower was told he had an “effective interest rate of 7 percent” when he was in fact paying something like 12.5 percent. “It was blatant fraud,” said Eisman. “They were tricking their customers.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“This was yet another consequence of turning Wall Street partnerships into public corporations: It turned them into objects of speculation. It was no longer the social and economic relevance of a bank that rendered it too big to fail, but the number of side bets that had been made upon it.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“The simple measure of sanity in housing prices, Zelman argued, was the ratio of median home price to income. Historically, in the United States, it ran around 3:1; by late 2004, it had risen nationally, to 4:1. “All these people were saying it was nearly as high in some other countries,” says Zelman. “But the problem wasn’t just that it was four to one. In Los Angeles it was ten to one and in Miami, eight-point-five to one.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“He walked around the Las Vegas casino incredulous at the spectacle before him: seven thousand people, all of whom seemed delighted with the world as they found it. A society with deep, troubling economic problems had rigged itself to disguise those problems, and the chief beneficiaries of the deceit were its financial middlemen.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“People with Asperger’s couldn’t control what they were interested in. It was a stroke of luck that his special interest was financial markets and not, say, collecting lawn mower catalogues.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“The most difficult subjects can be explained to the most slow-witted man if he has not formed any idea of them already; but the simplest thing cannot be made clear to the most intelligent man if he is firmly persuaded that he knows already, without a shadow of doubt, what is laid before him. —Leo Tolstoy, 1897”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“It was in Las Vegas that Eisman and his associates’ attitude toward the U.S. bond market hardened into something like its final shape. As Vinny put it, “That was the moment when we said, ‘Holy shit, this isn’t just credit. This is a fictitious Ponzi scheme.’” In Vegas the question lingering at the back of their minds ceased to be, Do these bond market people know something we do not? It was replaced by, Do they deserve merely to be fired, or should they be put in jail? Are they delusional, or do they know what they’re doing? Danny thought that the vast majority of the people in the industry were blinded by their interests and failed to see the risks they had created. Vinny, always darker, said, “There were more morons than crooks, but the crooks were higher up.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine

“Why were they prepaying so fast? Vinny asked himself. “It made no sense to me. Then I saw that the reason the prepayments were so high is that they were involuntary.”
― Michael Lewis, The Big Short: Inside the Doomsday Machine