Study Guide

The Big Short: Inside the Doomsday Machine Society and Class

By Michael Lewis

Society and Class

The creation of the mortgage bond market, a decade earlier, had extended Wall Street into a place it had never before been: the debts of ordinary Americans (1.14)

Before the creation of the mortgage bond, Wall Street companies focused on corporate debt, which makes sense, right? A business would naturally have a lot more cash to go around than a middle-class American. Though it might seem minor, this shift directly leads to the subprime mortgage crisis.

The growing interface between high finance and lower-middle-class America was assumed to be good for lower-middle-class America. (1.19)

The stated reason for the rise of the subprime bond is that it gives working-class folks an opportunity to be lent money at reasonable rates. That's great in theory, sure, but there's a big problem: those loans are explicitly designed to screw them over. It's a con.

Millions of Americans had no ability to repay their mortgages unless their houses rose dramatically in value, which enabled them to borrow even more. (3.9)

In other words, many Americans are relying on the increasing value of their homes (which they can then use to borrow more money) to pay their bills. That's a disaster waiting to happen. All it takes is a few months of falling home prices for the whole system to go kaput. Yikes. And that's pretty much exactly what happened.

Vinny and Danny flew down to Miami, where they wandered around empty neighborhoods built with subprime loans, and saw with their own eyes how bad things were. (4.78)

The dudes at FrontPoint spend a lot of time thinking about the subprime market, but even they are unprepared for the reality on the ground. It's one thing to look at a bunch of numbers in an online database and try to make sense of them, but it's a whole different ballgame when you see how those silly little digits have destroyed entire neighborhoods.

The more they examined the individual bonds, [...] they came to see [...] the new taste for lending huge sums of money to poor immigrants, for example. (4.41)

Now this is just evil. Many immigrants have high credit scores because of their new status in the country, even if they're working low-paying jobs. This, along with a lack of experience with the American banking system, leads many of them to be manipulated by the banks into taking awful home loans.

To the right were the targets: a photograph of [...] a young black kid attacking a pretty white woman, an Asian hoodlum waving a pistol. (6.21)

This is from Charlie Ledley's gun shop outing with the Bear Stearns bond traders, and we think it's a pretty apt metaphor for how the subprime mortgage market affects working class Americans. The Wall Street bros use them for target practice alongside pictures of Saddam Hussein and Osama bin Laden.

The Uzi, with far more killing power, was almost gentle: there was thrilling disconnect between the pain you experienced and the damage you caused. (6.21)

We aren't done with our gun shop metaphors just yet, folks. Here, the Uzi directly represents the subprime market: both "disconnect" a person from the "damage" they are able to cause with small actions. With one, you pull the trigger; with the other, you sell a bunch of fake money to another company. Tomato, tomahto.

A friend of Danny's returned from a night on the town to report he'd met a stripper with five separate home equity loans. (6.35)

Here's another small glimpse into how this financial mumbo-jumbo affects regular people. Although this bit is played for chuckles, it shows how bad things have become for the people on the other end of these cruddy subprime loans.

"I said to my mother, 'I think we might be facing something like the end of democratic capitalism," said Charlie. (7.1)

The ramifications of the subprime crisis aren't merely economic; they're political. If you want evidence of this, just consider the fact that the government literally intervenes to rectify the situation. That's no coincidence, people.

The monster was exploding. Yet on the streets of Manhattan there was no sign anything important had just happened. (10.75)

This is the truly freaky thing about The Big Short: it shows how divorced the financial world is from ours. Although the actions taken by Wall Street executives affect us on a personal level, it's almost as if we're living on different planets at times.

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