Book Report on “The Big Short” by Michael Lewis
“The Big Short,” written by Michael Lewis and published in 2015, is a text that tells the story of four outsiders in the high-finance world who were able to forecast the property and credit boom before anybody else. The book’s main subject is how Wall Street’s corruption and greed led to the 2008 subprime mortgage crisis. The 2008 financial crisis had an unfathomable effect on the US and global economies and a major impact on the banking industry. Although it was completely avoidable, large Wall Street corporations chose to disregard the impending collapse in order to make a profit. Therefore, Michael Lewis shares the true story of the 2008 mortgage crisis.
The author introduces the men who forecast the recession outside of the Wall Street system and how, through various methods, they could determine when and how the economy would crash. Lewis points out that the men – Jamie Mai, Mike Burry, Charlie Ledley, and Steve Eisman – were all underdogs who could recognize and exploit the credit mortgage market’s apparent flaws. Lewis’s ultimate point was to demonstrate how Wall Street firms distorted the economy. He demonstrates how some businesses utilized loans to capitalize on the poverty of lower and middle-class Americans and relied on the federal policy to bail them out when it became apparent that they would default on the loans.
The book consists of ten chapters that begin with describing how the major protagonists got into the stock market and became highly recognized in the sector right after the recession. Steve Eisman makes up most of the first chapter, which details his life before and after being on Wall Street. He was an attorney who resided in Oppenheim with his parents. In real life, Eisman, according to Michael Lewis, is an individualist. He was uninterested in collaboration or team bonding and aspired to start his own company. The chapter concludes with Eisman’s decision to join the bond markets to meet evolving financial needs.
The second chapter focuses on Michael Burry. His occupation suggested that he was an investment banker, but he had also dabbled in stock trading and gave advice to clients who were investors. He maintained a blog that many financial firms and investors read. Burry had Asperger’s Syndrome, which Lewis describes as beneficial because it gave him more time to research subprime mortgages and their impact on the capital markets in the US.
The third chapter discusses the variations between the bond and capital markets and the related interactions. Lewis explains how Eisman was able to appeal to the nature of the bond market, which was elusive and could be used for investment returns. As a result, Eisman was able to make large amounts of money off of consumers’ confusion and paranoia. It also demonstrates how Lippmann produced defaulted loans, which is continued in Chapter 4.
Other essential characters, such as Jamie Mai and Charlie Ledley, are featured in Chapters 5 and 6. Their tale centers on how they made about thirty billion dollars by purchasing insurance against improbable and unforeseen potential events. Lewis provides a thorough description of how small investors with a starting capital of just $120,000 could compete with the industry’s major players, particularly during a time of recession. The chapters also discuss how many capitalists profited greatly from Lippmann and the distribution of fake insurance stakes. Besides, both of them bet a trillion dollars on subprime mortgages.
Chapters seven and eight broke the flow and returned to conversations about Burry and Eisner’s personal lives. It is called “The Great Treasure Hunt” and set in 2007, after the demise of the Lehman Brothers and Eis
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