It becomes clear that the banks that sell these bonds don’t fully understand what they’re pushing. They learn that bad mortgages are being bundled into bonds that somehow receive the highest rating. In Chapters 4 to 7, the independent investors dig deeper into the mysteries of subprime bonds and their hidden pitfalls. It dawns on each of them that the much-touted bond market is likely to crash. The Big Short chronicles this story and the efforts of a small number of investors who realize a catastrophe is brewing and try to profit from it.Ĭhapters 1 through 3 introduce the independent investors who discover the flaw in the subprime mortgage bond market: Steve Eisman, who turns his anger at bond traders’ dishonesty into a crusade Michael Burry, an autistic medical doctor with a penchant for financial research and original thinking and Greg Lippman, a bond trader who learns of the danger from Burry and urges investors to get rid of their subprime bonds. When the bonds fail, hundreds of billions of dollars in securities become worthless, toppling major investment banks and forcing the government to step in to save the economy from collapse. These bonds become increasingly risky, but the danger is hidden from investors so cleverly that it fools even the banks that sell them. At the center of the storm are subprime mortgage bonds, securities that package lower-quality home loans as investments. The crash results from years of financial malfeasance and incompetence among the top salesmen and executives at the largest Wall Street banks.
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