How we cite our quotes: (Chapter.Paragraph)
Quote #1
These companies disclosed their ever-growing earnings, but not much else. (1.29)
This is the beginning of the end. As soon as financial companies and banks try to hide their investments, it becomes inevitable that someone will use that obscurity for ill.
Quote #2
A mortgage created in early 2005 might have a two-year "fixed" rate of 6 percent that, in 2007, would jump to 11 percent and provoke a wave of defaults (2.10)
At the root of the 2008 financial crisis are cruddy, manipulative home loans that jump up massively in price after a fixed two-year period. Think about that for a second. The world economy almost collapsed because of those shady loans you get in your junk mail. Scary thought, huh?
Quote #3
[T]here were huge sums of money to be made, if you could somehow get [bonds] re-rated as triple-A [...] however dishonestly and artificially. (3.29)
Once subprime mortgage bonds become a hot item in the financial market, bond traders realize that they can make a lot more money if they trick the ratings agencies into rating them more highly. Of course, that's straight-up fraud, but did that ever stop Wall Street before?
Quote #4
They'd phone up an originator and say, "Don't tell anybody, but if you bring me a pool of loans teeming with high thin-file FICO scores I'll pay you more for it than anyone else." (4.46)
As the subprime market grows, it becomes advantageous for banks to find people who they know won't be able to pay them back, because then they'll make a killing off of jacked-up interest prices and fees. This scheme ends up impacting working-class immigrants more than anyone else. It's a nasty scene.
Quote #5
Here was another bizarre fact about CDOs: Often they simply repackaged tranches of other CDOs, presumably those tranches their Wall Street creators had found difficult to sell. (5.58)
If you think about this for a second, you'll realize that this is why the subprime market nearly crashed the world economy. Basically, an individual mortgage can be inside a theoretically infinite number of CDOs, which a theoretically infinite number of people can bet against. That means a single bad mortgage can cause a much larger amount of debt that its actual monetary value.
Quote #6
That was the reason the casino bothered to list the wheel's most recent spins: to help gamblers to delude themselves. (6.24)
This anecdote illustrates "recency bias," which is when a person assumes that whatever happened recently is going to happen in the future. This mental trip-up plays a big role in the ballooning of the subprime mortgage market.
Quote #7
The Venetian was a jangle of seemingly random effects designed to [...] to alter your perception of your chances and your money (6.32)
Does this sound familiar? Like a Las Vegas casino, a subprime mortgage bond is specifically designed to confuse the person looking at it, manipulating them into thinking that it is of a higher quality than it actually is. You know, now that we think about it, gambling and investing aren't so different after all.
Quote #8
Wall Street was propping up the price of these CDOs so that they might either dump losses on unsuspecting customers or make a last few million dollars from a corrupt market. (7.11)
Even after subprime mortgages start going bad across the country, the Wall Street firms aren't done manipulating the market. In order to cover their butts as best they can, they artificially inflate the prices of bonds for months, using that time to sell off as much as possible. If anything, this shows that Wall Street's corruption has only grown worse.
Quote #9
For more than twenty years, the bond market's complexity had helped the Wall Street bond trader to deceive the Wall Street customer. It was now leading the bond trader to deceive himself. (9.14)
This is what we call the "Ouroboros" moment in The Big Short: the moment when Wall Street becomes so effective at manipulating the market that they accidentally manipulate themselves. Whoops. In some ways, this was inevitable, as the subprime market has expanded to an insane degree over the past several years. How are you supposed to keep track of all of that?
Quote #10
One trillion dollars in losses had been created by American financiers, out of whole cloth, and embedded in the American financial system. (9.59)
This is the end result of the subprime mortgage market: $1 trillion in fake money that nearly collapses the world economy. The situation could have easily been avoided, but the thought of record-breaking profits was too tempting for Wall Street nasties to ignore.