Rules and Order Quotes in The Big Short: Inside the Doomsday Machine

This that Wall Street firms will always have the money to pay off their debts is a key component of the American financial system. They're the experts, right? But if this assumption is proven wrong, as it is by the end of The Big Short, where does that leave us? We'll have to look deeper to find out.

If you ask Michael Burry what he thinks about the financial system, he won't make any bones about it—he thinks that most of it is BS. Although everything seems perfectly ordered on the surface, it's actually quite chaotic.

Though the financial industry has to deal with many regulations, the bond market somehow sneaks by unnoticed. Do you think it's a coincidence that things ended up going so rotten?

That's a good question, Michael Lewis, and we were actually hoping that you had an answer. No? Putting that aside, however, the uncomfortable truth is that there isn't a real answer—the rules got exploited simply because it was more profitable to exploit them. Gross, huh?

Corruption can take many different forms. It can take the form of failing to rate stocks accurately. In can take the form of placing too much trust in banks. It can even take the form of former ratings analysts spilling their secrets to Wall Street for some sweet consultant cash. No matter how you look at it, these "regulations" don't count for much.

Charlie Ledley hits the nail on the head with this one. Our short-selling heroes keep trying to find order underpinning the subprime market, but there isn't any order—just chaos as far as the eye can see. In fact, the system was expressly created to achieve this chaos.

Our heroes end up playing right into Wall Street's hands because their bets against the market allow the banks to create what are essentially fake bonds. It's at this moment that Eisman fully realizes the extent of Wall Street's corruption: if there's a loophole that can be exploited for short-term profit, then that sucker is going to be exploited to high heaven.

In other words, Eisman is saying here that the creation of synthetic CDOs (which are fake mortgage bonds that contain no mortgages, but are instead bets against mortgages) is what caused the financial crisis. Want to know what's even worse? It was all legal.

As much as we can blame Wall Street for taking advantage of consumers, the ratings agencies deserve an equal amount of blame. They could have stopped the subprime market at any time by taking a closer look at the mortgages in question and accurately rating them, but they were too blinded by potential profits to do the right thing.

Here's how bad things are within the ratings agencies: they don't even know what's inside the mortgage bonds they're rating. That's like a mechanic working on your car without opening the hood, or a doctor treating an illness over email. It just doesn't make sense.