Big Shorts Michael Lewis Exposes Wall Street


Michael Lewis is an American contemporary non-fiction author and financial journalist. He was once called the ???wonder boy??? of Wall Street, in a Michael Fox ???The Secret of My Success??? kind of way. Lewis has estimated that he sold ???some millions??? of books writing tell-alls about the machinery and mechanics of the financial collapse of Wall Street, which was dubbed ???the greatest financial collapse since the Great Depression.???

Raised in New Orleans to a corporate lawyer dad and community activist mother, Lewis was a Princeton graduate with no financial experience whatsoever when he landed a job at Salomon Brothers, which had previously turned him down for a job, while in London. The story goes that an English cousin manipulated a banquet seat for him next to the wife of a managing partner of the capitalist firm, who then persuaded her husband to set up an interview for him. The rest is his story.

After training in New York, Lewis returned to London and was literally ???handed,??? according to him, several multi-million dollar accounts with the Salomon Brothers to manage, though he had no money management skill of the magnitude that he was entrusted with. However inexperienced, he managed to succeed and go over the top, but became disillusioned in the ways of Wall Street finances when he realized that the industry was building a new set of bargaining chips that included cheating the poor and middle classes out of every dime for which they worked and saved.

As simple as that sounds, the machine behind it was only easy when it came to the investing insiders who knew the game, how to play it and had the money to play with. Lewis was one of the early whistle-blowers who saw the collapse coming, but who was also put outside the Wall Street circles and essentially ignored until all of the dominoes started to fall, one square at a time ??¦ and the largest collapse began with the investment bankers for Citigroup, formerly called Salomon Smith Barney.

In his books, the one in this review and in ???Liars Poker,??? Lewis details the intricate events and the players, who were not as sophisticated in finances as the average consumer is led to believe, that led to the credit default swaps and paid-for Moodys insurance ratings that brought the subprime lending market to its knees and subsequently threatened the lives and livelihoods of millions of people, nearly putting a huge portion of Americas middle class out in the streets and back in the soup kitchens of the 1920s.

Lewis is the father of two daughters and one son and currently lives in semi-seclusion somewhere in Berkeley, California, with his third wife, former MTV reporter Tabitha Soren. He is known to the Wall Street financiers as a traitor for going public and documenting much of the information that we now know as the truth about Wall Street.


I chose this book and this author, because when it comes to financial management, the thirty years between 1980 and 2010 will be the biggest story of the next century, unless something equally as bad or worse happens before 2100. None of us will be around by then, but we can document now that we lived through this era of financial collapse, threats and doom to the ???rich mans game??? on Wall Street, New York; and the second worst economic crises in America since the Great Depression of the 1920s. A tight recession was created during the 1980s by the trickle-down politics of the Reagan administration, but nothing half as bad as the Bush-era economic policies that sent Americas spending deficit skyrocketing from the billions to the trillions in zero to sixty.

The subprime lending market for homeownership was not really a market, but a lose-lose proposition from the moment it was conceived. According to Lewis, the reason it was created was because someone decided they should hedge their bets, not for the lower and moderate-income people who borrowed money for homes, but against them. It appears that the creative financing schtick was based on making money betting that the average homeowner would not keep their house for more than two to seven years before they would be hit by a foreclosure.

In other words, to hear Lewis tell it, it was set up for default mortgage servicing, where the ???real??? money was. Prices were then set to make sure that the homeowner would never own the home, simply because the investors made more money re-selling the same home over and over again than it did assisting borrowers with becoming true credit-worthy landowners. If a home was meant to be an inheritance for future generations and something to be leveraged to build a business or pay off escalating debts in case of emergencies, this market, in Lewis estimation, was set up to make certain that never happened; and that those who were trying to get on their feet financially never got to even sit up straight.

It was the biggest shift of credit and cash and economic resources to a lop-sided and way off-balance richest one-percent of this nation that America had ever seen, and hopefully ever will again.


As this book report is written, there is in current events, a rising feeling of ill-will toward not only Wall Street, but to the banking and insurance industries at-large, who spent what some will say is the last thirty years beating Americas middle class out of its rights, its inheritance, and its future, only to watch itself fall as a result. Others may say that the crashers have made even more financial gains by cashing out, or shorting, Americas middle class, because it was designed to crash. Those who were managing the money didnt appear to stop and think that the people they were trying to hurt most would be their own downfall. According to Lewis the cult phenomena amongst the investors, lenders and insurers was ???eff the poor.??? Well, unfortunately for most of us, the poor are so intricately connected to the middle class that it ended up affecting them the most. The poor will remain with us always, and it will always be our responsibility as global captains to champion their causes and they will always be cared for; however, the middle class, already strained with over-burdened debts, daily struggles, the trials of tribulations of keeping their head above water, were also the main caretakers of their poorer relatives and fellow citizens while scuffling toward the ???top.??? Were almost ???there.??? [where] So the current, and passing, economic crises hit the middle class the hardest.

There is heated argument and debate that the middle class victimized itself and caused its own demise, or near-demise. Some say it was because of the desperate want and need in Maslows Hierarchy of something that it could not truly afford ??“ nice homes, big cars, fancy showboat credit cards and plenty of bling ??“ modeled after the big-timers who were on hefty Hollywood salaries, on the payrolls of team sports owners who called a million dollars ???spare change,??? and at the behest of tons of network marketing companies and motivational speakers and ???dreamers??? and keepers of ???The Secret??? laws of attraction who promised the average everyday person that, for $19.95 or $199.95 or $1,995.95 or $9,995.95 a pop, or for a pretty sizable donation, they could make their wildest and most envy-ridden dreams of living like Donald Trump or Bill Gates, or even the late great Michael Jackson, come true. The problem came in, some say, when the average person didnt bother to learn a lesson that their, and our, ancestors already knew. Riches come to us in only four ways, inheritance, marriage, leverage of something more valuable than the money itself, or by lottery winnings-what we may refer to as pure ???dumb luck.??? Everything before, after and in-between is a matter of industriousness.

Others will say that because ???poor??? America was victimized by Wall Street moguls, it flushed the armor-bearers in middle class America right along with it. Either way, it appears that the boot-strapping theories and trickle-down beliefs of the principals of finances and economics in the eighties were way off target and essentially proven dead wrong. In Lewis book, he makes it clear that the game wasnt meant to be won by the average everyday working Joe or Jane Blow; it was meant only to clean the ???poor??? out of house, home, and closet; so that a finger of blame could be pointed at them and the words, essentially, ???see we told you theyre all a bunch of deadbeats who dont pay their bills??? could be used to justify and form a basis for ill treatment of the poorer classes in the years and decades to come.

Fortunately for most of us, Lewis was placed into Wall Street in his position, not to become ???richer than God,??? but for the purpose of exposing the subprime lending market for exactly what it was and what it ultimately became-the Liars Poker. There were many, he said and I paraphrase, that saw it coming, but turned a blind eye to it because of the money they stood to make to keep it quiet.

Between credit default swaps, mortgage bond trading (which was created literally ???out of the sky blue thin air,??? Standard & Poors and Moodys being paid to A-rate sufficiently D-rated bonds, and ill-fated CDOs (asset-backed securities known as ???collateralized debt obligations???), nobody stood to lose more than a single person or couple who signed their name(s) and their future income(s) over to a 30-year mortgage for a home that was, realistically, paid in full within less than ten years. That marked the beginning of how an $80,000 home would end up costing the average buyer more than a million dollars if they could manage to stay afloat economically for that long a period without failure or shortcomings or financial loss; and the insurers and investors and bankers/lenders were betting they would not.

In movieland, it could be called a ???Trading Spaces??? type of venture where two or more old coots with nothing better to do with their time set out to prove the scientific theory behind nature versus nurture. In the movie, Mortimer and Randolph bet one dollar. In real life, Wall Street bet against the lives of the USAs hardest-working citizens, then sweetened the pot by moving the bulk of Americas jobs to mostly Asian countries while sitting back to watch the carefully-supervised fallout. What they didnt bet on was the huge citizens backlash that ushered former United States Senator Barack H. Obama into office as President of the United States in 2008, and thats where the long-tarnished plot began to unravel.

???When the crash of the U.S. stock market became public knowledge in the fall of 2008, it was already old news.??? These are the words imprinted on the back of ???The Big Short.???

Justification for Opinion

In my opinion, there isnt going to be much that President Obama can do to right the wrongs or serve justice on the financial wrong-doers in four years in office, or even if he is re-elected in 2012, for the next four afterward. However, as this book report is written, major protests are going on all over the nation that are proving out the truth behind the words ???There is no such thing as too big to fail.???

Many of the Wall Street entities that were the major players in the 1980s Money Game of the Century have already come to a complete halt or have been forced to disassociate themselves with the big financial names that bring rage or indignant glances from the average American consumer, and many more are toppling even as we speak. There has been a large public outcry for economic justice against Wall Street, against insurers such as AIG, and against banks and consumer lenders, such as the now-defunct Household Finance and Countrywide. Only time will tell if the major banks still standing that are not community, home and credit-union driven will be driven as far out of town as the s&ls (savings & loan associations) of the mid-80s and 90s, but according to Lewis interview with Steve Eisman, ???theres no limit to the risk in the market??¦a bank with a market capitalization of one billion dollars might have one trillion dollars worth of credit default swaps outstanding…???

Quote: It [is] no longer the social and economic relevance of a bank [rendered] ???too big to fail,??? but the number of side bets that had been made upon it. – Michael Lewis

Lewis, Michael. (2010) “The Big Short: Inside the Doomsday Machine.” WW Norton & Company, Inc., New York