Lewis' "The Big Short" is Non-Fiction that Reads Like a Novel
Michael Lewis, perhaps one of the best non-fiction storytellers of the last 20 years and the author that has brought such seminal works as "Liar's Poker," "Moneyball" and "The Blind Side," has yet again produced a non-fiction work in "The Big Short" that is both so insightful and so entertaining that the reader will often forget that he or she is reading about real life. Lewis, who began his career on Wall Street at a very young age, lampooned both his own involvement with that industry and the industry itself in his first big work, "Liar's Poker," and with "The Big Short" has circled back around to the scene of the 1980s crime to show that not much has changed in 25 or 30 years.
Back then, the machinations inside Salomon Brother, where Lewis worked briefly as a young man just out of college, were the setting for the greed and near insanity that ruled the day on Wall Street. In the modern-day, Lewis touches on the role that various financial giants played in the subprime mortgage meltdown, and the very small group of virtually unknown players who had the foresight to understand what was going on and, in essence, short the U.S. financial system. Firms like Goldman Sachs, Morgan Stanley, Lehman Brothers, AIG, Citigroup and others are shown circling a new, obscure market and the would-be investors in that market like sharks, and ending up on the wrong side of a $1 trillion bet that nearly bankrupted the lot of them and cost the U.S. taxpayer dearly.
Viewed through the lens of the most unlikely group of characters, "The Big Short" shows the other side of the meltdown that caused such chaos in the U.S., the effects of which will be felt for years to come. Among those real-life protagonists are a one-eyed former medical doctor with Asperger's Syndrome, a lawyer-turned-fund manager who had never dabbled in bond markets prior to the subprime era, a pair of transplanted Manhattanites living in Berkley, California and running an investment fund out of a garage and a bond trader with Bear Stearns who had no business doing anything but making a market but who decided instead to accumulate a short position against subprime mortgages.
The prescience of the cast of unlikely financial players is astounding, though the personal nuances and reactions of the various players is what makes the story so interesting, along with Lewis' expert explanation for some of the least-understood, most arcane "investments" every dreamed up. Not only is the reader treated to a plain English explanation of the subprime mortgage-backed securities, collateralized debt obligations and credit default swaps that were the instruments of destruction - or of riches, in the case of the story's main players - but Lewis also delves into the big picture view of the government's role (or lack thereof) in the entire mess and its entirely inappropriate response to the situation once the consequences of unbridled greed and utter stupidity became clear.
The final piece of the puzzle presented by Lewis is the role that the bond ratings agencies - Moody's, S&P and Fitch - played in the entire mess, with special attention to the AAA ratings that were bestowed upon subprime mortgage-backed bonds that consisted of such shaky individual loans that the chance of repayment was virtually zero. With no individual or organization (or government) deserving to be spared, Lewis, to his credit, spares on one. What it all amounts to is an entertaining read that will have readers alternately laughing and cringing at the actions and thought processes of the major contributors to both the financial meltdown and the tremendous profits realized by a very small group of traders.
