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181 " 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? He tried, but his English in-laws just looked at him strangely. They understood that someone else had just lost a great deal of money and Ben had just made a great deal of money, but never got much past that. "I can't really talk to them about it," he says. "They're English. "
― Michael Lewis , The Big Short: Inside the Doomsday Machine
182 " 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. "
183 " 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. "
184 " 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. "
185 " Writing a check separates a commitment from a conversation. —Warren Buffett "
186 " After that, the men in the room rushed for the exits, apparently to sell their shares in Bear Stearns. By the time Alan Greenspan arrived to speak, there was hardly anyone who cared to hear what he had to say. The audience was gone. By Monday, Bear Stearns was of course gone, too, sold to J.P. Morgan for $2 a share.* "
187 " 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.) "
188 " 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 "
189 " 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. "
190 " He was like some tragic figure in Greek mythology whose offenses against the gods had caused them to design for him this exquisite torture: you must desperately need to see what you cannot bear to see. "
― Michael Lewis , Moneyball: The Art of Winning an Unfair Game
191 " 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 "
192 " 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. "
193 " He wore the same shorts and t-shirts to work for days on end. He refused to wear shoes with laces. He refused to wear watches or even his wedding ring. To calm himself at work he often blared heavy metal music. "
194 " Every form of strength covers one weakness and creates another, and therefore every form of strength is also a form of weakness and every weakness a strength. "
195 " worth. A baseball team, of all things, was at the center of a story about the possibilities—and the limits—of reason in human affairs. Baseball—of all things—was an example of how an unscientific culture responds, or fails to respond, to the scientific method. As I say, I fell in love with a story. The story is about professional baseball and the people who play it. At its center is a man whose life was turned upside down by professional baseball, and who, miraculously, found a way "
196 " 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 "
197 " 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 "
198 " The power of an imagination can arise from what it refuses to foresee. "
199 " If it doesn’t happen, it never was going to happen. If you never did it, it wasn’t there to begin with. "
200 " There was one sure way, and only one sure way, to get ahead, and everyone with eyes in 1982 saw it: Major in economics; use your economics degree to get an analyst job on Wall Street; use your analyst job to get into the Harvard or Stanford Business School; and worry about the rest of your life later. So, "
― Michael Lewis , Liar's Poker