Subpriming with Michael Lewis
When I returned to the United States in 1990 after spending most of the previous six years in Africa, one of the first books I read was Michael Lewis's Liar's Poker. I wanted to catch up with a culture that had moved away while I was away. It boggled my mind; all I could think of was Sammy Glick, in Budd Schulberg's classic What Makes Sammy Run? It turns out that I wasn't wrong to make that connection. Schulberg, who is now 94, has spent his life since creation of Sammy fending off those who would thank him for providing a roadmap to Hollywood success. The same thing happened to Lewis:
Six months after Liar’s Poker was published, I was knee-deep in letters from students at Ohio State who wanted to know if I had any other secrets to share about Wall Street. They’d read my book as a how-to manual.
Schulberg's father ran a Hollywood studio. Growing up in the business, Schulberg really did know it, inside and out. Lewis claims to have gone to Wall Street as the complete neophyte. He did, however, manage to learn how it operates, inside and out. And he still does, as his article in the December, 2008 issue of Portfolio proves. It's an article everyone should read. Here's just a taste:
“No,” said Eisman. “It’s a zero. There is zero probability that your default rate will be 5 percent.” The losses on subprime loans would be much, much greater. Before the guy could reply, Eisman’s cell phone rang. Instead of shutting it off, Eisman reached into his pocket and answered it. “Excuse me,” he said, standing up. “But I need to take this call.” And with that, he walked out.
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