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161 " This wasn’t just another company—this was the biggest company by far making subprime loans. And it was engaged in just blatant fraud. They should have taken the CEO out and hung him up by his fucking testicles. "
― Michael Lewis , The Big Short: Inside the Doomsday Machine
162 " default swaps on subprime mortgage bonds. Only a triple-A-rated corporation could assume such risk, no money down, and no questions asked. Burry was right about this, too, but it would be three years before he knew it. The party on the other side of his bet against subprime mortgage bonds was the triple-A-rated insurance company AIG—American International Group, Inc. Or, rather, a unit of AIG called AIG FP. AIG Financial Products was created "
163 " The big fear of the 1980s mortgage bond investor was that he would be repaid too quickly, not that he would fail to be repaid at all. The pool of loans underlying the mortgage bond conformed to the standards, in their size and the credit quality of the borrowers, set by one of several government agencies: Freddie Mac, Fannie Mae, and Ginnie Mae. The loans carried, in effect, government guarantees; if the homeowners defaulted, the government paid off their debts. "
164 " He has no interest in manners. Believe me, I’ve tried and I’ve tried and I’ve tried.” After she’d brought him home for the first time, her mother had said, “Well, we can’t use him but we can definitely auction him off at UJA.”* Eisman had what amounted to a talent for offending people. “He’s not tactically rude,” his wife explains. “He’s sincerely rude. He knows everyone thinks of him as a character but he doesn’t think of himself that way. Steven lives inside his head. "
165 " best definition of “investing” is “gambling with the odds in your favor.” The people on the short side of the subprime mortgage market had gambled with the odds in their favor. The people on the other side—the entire financial system, essentially—had gambled with the odds against them. "
166 " All these subprime companies were calling and hollering at him: You’re wrong. Your data’s wrong. And he just hollered back at them, ‘It’s YOUR fucking data! "
167 " cause of the financial crisis was “simple. Greed on both sides—greed of investors and the greed of the bankers.” I thought it was more complicated. Greed on Wall Street was a given—almost an obligation. The problem was the system of incentives that channeled the greed. The line between gambling and investing is artificial and thin. "
168 " Real risk was not volatility; real risk was stupid investment decisions. "
169 " Investing well was all about being paid the right price for risk. "
170 " The purpose was to extend credit to less and less creditworthy homeowners, not so that they might buy a house but so that they could cash out whatever equity they had in the house they already owned. "
171 " The CDO was, in effect, a credit laundering service for the residents of Lower Middle Class America. For Wall Street it was a machine that turned lead into gold. Back "
172 " If you’re in a business where you can do only one thing and it doesn’t work out, it’s hard for your bosses to be mad at you. "
173 " 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. "
174 " the Wall Street firm became a black box. The shareholders who financed the risk taking had no real understanding of what the risk takers were doing, and, as the risk taking grew ever more complex, their understanding diminished. "
175 " Both had trouble generating conviction of their own but no trouble at all reacting to what they viewed as the false conviction of others. "
176 " To Danny and Vinny, Greg Lippmann was a walking embodiment of the bond market, which is to say he was put on earth to screw the customer. Three "
177 " The presence of millions of small investors had politicized the stock market. It had been legislated and regulated to at least seem fair. "
178 " Each time, Lippmann would talk a mile a minute, and Danny and Vinny would stare in wonder. Their meetings acquired the flavor of a postmodern literary puzzle: The story rang true even as the narrator seemed entirely unreliable. "
179 " Immigrants who had never failed to repay a debt, because they had never been given a loan, often had surprisingly high thin-file FICO scores. Thus a Jamaican baby nurse or Mexican strawberry picker with an income of $14,000 looking to borrow three-quarters of a million dollars, when filtered through the models at Moody’s and S&P, became suddenly more useful, from a credit-rigging point of view. They might actually improve the perceived quality of the pool of loans and increase the percentage that could be declared triple-A. The Mexican harvested strawberries; Wall Street harvested his FICO score. "
180 " The more egregious the rating agencies’ mistakes, the bigger the opportunity for the Wall Street trading desks. In "