The Big Short: Inside the Doomsday Machine Read Online Free PDF Page B

shipment of stories arrived. He knew more than any grown man should about the lives of various superheroes. He knew the Green Lantern oath by heart, for instance, and understood Batman's inner life better than the Caped Crusader himself. Before the death of his son, Eisman had read the adult versions of the comics he'd read as a child-- Spider-Man was his favorite. Now he read only the darkest adult comics, and favored those that took familiar fairy tales and rearranged them without changing any of the facts, so that the story became less familiar, and something other than a fairy tale. "Telling a story that is consistent with everything that happened before," as he put it. "And yet the story is totally different. And it leads you to look at the earlier episodes differently." He preferred relations between Snow White and the dwarves to be a bit more fraught. Now a fairy tale was being reinvented before his eyes in the financial markets. "I started to look more closely at what a subprime mortgage loan was all about," he said. "A subprime auto loan is in some ways honest because it's at a fixed rate. They may be charging you high fees and ripping your heart out, but at least you know it. The subprime mortgage loan was a cheat. You're basically drawing someone in by telling them, 'You're going to pay off all your other loans--your credit card debt, your auto loans--by taking this one loan. And look at the low rate!' But that low rate isn't the real rate. It's a teaser rate."
    Obsessing over Household, he attended a lunch organized by a big Wall Street firm. The guest speaker was Herb Sandler, the CEO of a giant savings and loan called Golden West Financial Corporation. "Someone asked him if he believed in the free checking model," recalls Eisman. "And he said, 'Turn off your tape recorders.' Everyone turned off their tape recorders. And he explained that they avoided free checking because it was really a tax on poor people--in the form of fines for overdrawing their checking accounts. And that banks that used it were really just banking on being able to rip off poor people even more than they could if they charged them for their checks."
    Eisman asked, "Are any regulators interested in this?"
    "No," said Sandler.
    "That's when I decided the system was really, 'Fuck the poor.'"

    In his youth, Eisman had been a strident Republican. He joined right-wing organizations, voted for Reagan twice, and even loved Robert Bork. It wasn't until he got to Wall Street, oddly, that his politics drifted left. He attributed his first baby steps back to the middle of the political spectrum to the end of the cold war. "I wasn't as right-wing because there wasn't as much to be right-wing about." By the time Household's CEO, Bill Aldinger, collected his $100 million, Eisman was on his way to becoming the financial market's first socialist. "When you're a conservative Republican, you never think people are making money by ripping other people off," he said. His mind was now fully open to the possibility. "I now realized there was an entire industry, called consumer finance, that basically existed to rip people off."
    Denied the chance to manage money by his hedge fund employer, he quit and tried to start his own hedge fund. An outfit called FrontPoint Partners, soon to be wholly owned by Morgan Stanley, housed a collection of hedge funds. In early 2004, Morgan Stanley agreed to let Eisman set up a fund that focused exclusively on financial companies: Wall Street banks, home builders, mortgage originators, companies with big financial services divisions--General Electric (GE), for instance--and anyone else who touched American finance. Morgan Stanley took a cut of the fees off the top and provided him with office space, furniture, and support staff. The only thing they didn't supply him with was money. Eisman was expected to drum that up on his own. He flew all over the world and eventually met with hundreds of big-time investors. "Basically we tried