The Big Short: Inside the Doomsday Machine

It was as if Wall Street had decided to allow everyone to gamble on the punctuality of commercial airlines.

One man’s liability had always been another man’s asset, but now more and more of the liabilities could be turned into bits of paper that you could sell to anyone. In short order, the Salomon Brothers trading floor gave birth to small markets in bonds funded by all sorts of strange stuff: credit card receivables, aircraft leases, auto loans, health

That was the problem with money: What people did with it had consequences, but they were so remote from the original action that the mind never connected the one with the other.

The accounting rules allowed them to assume the loans would be repaid, and not prematurely. This assumption became the engine of their doom.

Complicated financial stuff was being dreamed up for the sole purpose of lending money to people who could never repay it.

Eisman, predisposed to suspect fraud in the market, wanted to bet against Americans who had been lent money without having been required to show evidence of income or employment.

the markets were predisposed to underestimating the likelihood of dramatic change.

All that was clear was that the profits to be had from smart people making complicated bets overwhelmed anything that could be had from servicing customers, or allocating capital to productive enterprise.

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.