The Big Short
I finished reading a book in less than 24 hours yesterday. That’s a first for me. I couldn’t help it. Hearing the story of how my economic future was flushed down the toilet from the perspective of the handful of people who predicted it is exhilarating to me.
The Big Short didn’t change anything I believe about the financial meltdown, but it did reaffirm everything tenfold. My first thought is, holy shit, how isn’t anyone in jail yet? There is certainly enough evidence out there to start prosecuting people. My second thought is, how are the rating agencies possibly still in business? Seriously, what other company could fail so spectacularly at its job and stay open for business? This isn’t even the first time they’ve been found wholly incompetent.
The one bit of new perspective I did gain from the book was that the real winners in the whole situation were the people that were able to game the system in their favor. Mortgage lenders gamed the system by suckering people into complex loans they couldn’t possibly afford, then packaging them as bonds and selling them off, thus avoiding any of the risk associated with these shitty loans. The banks gamed the system by hiding the shittiest of these mortgage backed bonds, which they couldn’t otherwise sell, in derivatives so complex that they didn’t fully understand them, let alone their customers or the rating agencies. When mortgage lenders weren’t making loans fast enough to fill the investment banks’ appetite, they further gamed the system by simply building fictional financial instruments on top of these already worthless assets. The heroines of the book gamed the system by literally creating a new market that allowed them to bet against these worthless, ticking time bombs of financial disaster.
I would say that the great recession will be the defining moment of my generation, however, that would be foolish. We’ve had no less than four different defining moments in just the last decade. If anything, it looks like my generation will at least be action packed. Who knows what’s coming next? I can only hope it’s more Zefram Cochrane and less Skynet.
