Book thread

[pioneer98]

Reading this one now. It's pretty great, as you'd expect from a Michael Lewis book



Read it and you'll be astonished that nobody went to jail for this. Fraud and idiocy ran rampant and that's why we are in this mess now.

Yes, it tells a pretty convincing account of that whole debacle. It should be mandatory reading.

[thrill]

Reading this one now. It's pretty great, as you'd expect from a Michael Lewis book



Read it and you'll be astonished that nobody went to jail for this. Fraud and idiocy ran rampant and that's why we are in this mess now.

Yes, it tells a pretty convincing account of that whole debacle. It should be mandatory reading.

I bought it when it came out and was really excited to read it so I could sound smart when people brought up the economy, but the overall tone of how nobody knows the consequences of what they do before they do or they do and they do it anyway and how no one really has to face the consequences for treating people's money like it's a game was so depressing I quit halfway through.

[pioneer98]

I bought it when it came out and was really excited to read it so I could sound smart when people brought up the economy, but the overall tone of how nobody knows the consequences of what they do before they do or they do and they do it anyway and how no one really has to face the consequences for treating people's money like it's a game was so depressing I quit halfway through.

You quit too soon. The fun part of the book is that those people get it stuck to them by the people who do know what they are doing, and do care about the fact it is real money.

[AWvsCBsteeeerike3]

Can we get a summary. I don't really want to read it but would love to know the story. Thanks.

[heyzeus]

Can we get a summary. I don't really want to read it but would love to know the story. Thanks.

Subprime lending becomes a big thing in the early 2000s. As the years go by, they start extending more loans to people without any proof of income or down payment. The loans start with a reasonable interest rate like 6%, then after 2 years balloon to 12%. The lenders don't care, because they sell the mortgages to banks right away; they also don't care because they assume, like everyone, that housing prices always rise. Because they always rise, homeowners will either pay the higher interest rate (more money for the banks) or refinance (and the fees mean more money for the bank).

The big banks and insurance company AIG are the focus of the book. The traders at Bear Stearns, Goldman, Deutsche etc. realize they can make way more money selling multibillion dollar bonds than just stock trading (internet has really undercut their commissons on stock trades). They package thousands of these subprime mortgages into bonds. Nobody can really tell what's in the bonds. The ratings agencies get paid by the investment banks, so they give the bonds favorable ratings - they also don't know anything about the quality of the underlying mortgages within the bonds.

But then it gets better. The banks create what are called CDOs - collateralized debt obligations. A CDO is a security too, but it's made of hundreds or thousands of subprime bonds, and each bond itself is made of hundreds or thousands of subprime mortgages. NOBODY knows what's in the CDOs. Again, the rating agencies (Fitch, S+P, Moody) are being paid by the investment banks. Most of CDOs get AAA ratings even though the bonds within them have BBB ratings (the lowest grade of bond). AIG and others are convinced to start selling what's called credit default swaps on these bonds and CDOs. A credit default swap is essentially insurance on the security; An investor can make the bet, called shorting, that a certain % of the underlying mortgages default. Only a savvy few investors understood just how crappy the mortgages in these bonds and CDOs were, and shorted them. They made billions. Everyone else lost their ass when....

It's all predicated on that assumption that home prices will keep going up and up. But once the interest rates start ballooning around 2006 and moreso in 2007, people start defaulting on their mortgages. The more people default, the bigger the hit on home prices. The bigger the hit on home prices, the more people default. Everyone left holding the subprime bonds and CDOs (or who had sold credit default swaps on them, which is like owning them) lost billions.

And that's how we got where we are today, roughly.

[AWvsCBsteeeerike3]

Thanks zeus.

[Vidor]

This should be required reading for any small child

My 3 girls favorite book.

"I TOLD you and TOLD you there was nothing to be afraid of."

[wart57]

This should be required reading for any small child

My 3 girls favorite book.

"I TOLD you and TOLD you there was nothing to be afraid of."

Stinky could read the word "Please" when she was 2.... or maybe she jusr memorized the book....

[Vidor]

My daughter likes the "BONK BAM BINK CLONK BONK BING" part where Grover is building the wall.

If your kids are still in that age range you might try the Elephant and Piggie books. Upthread I linked to a discussion of "We Are In A Book", which has the same kind of no-fourth-wall deal, but we've read five or so and they've all been pretty funny.

[wart57]

My daughter likes the "BONK BAM BINK CLONK BONK BING" part where Grover is building the wall.

If your kids are still in that age range you might try the Elephant and Piggie books. Upthread I linked to a discussion of "We Are In A Book", which has the same kind of no-fourth-wall deal, but we've read five or so and they've all been pretty funny.

Thanks for the tip, I will check them out. My girls demand that I do the Grover voice and all the sound effects, probably why I love the book so much as well. I do an awesome Grover voice.