89). Deutsche Bank was demanding thatin order to be allowed to keep hisexpensive short position, Greg Lippmannhad to prove other investors wereinterested, so approached Steve Eisman(90-95). It took Eisman and Danielmonths to figure out how the ratingagencies were being gamed by tacticslike manipulating borrowers' FICO scores(creditworthiness ratings) (95-103).
Ch. 5: Accidental Capitalists.
GregLippmann's pitching the idea led 10-20people "to bet against the entiresubprime mortgage market and, byextension, the global financial system"—including John Paulson, a New York hedgefund manager (105; 104-06). Paulsonmarketed the idea as "a cheap hedgeagainst the remote possibility of catastrophe" (106). The people who sawwhat was happening "were, almost bydefinition, odd. But they were not all oddin the same way" (107). The sardonicallytold story of the three odd people behindCornwall Capital's success in "event-based investing" (108-25). Withoutreally being able to understand whatthey are doing, they took a $110 millionposition in CDOs (125-35).
Ch. 6: Spider-Man at The Venetian.
In Las Vegas in January 2007, Eismanmet Wing Chau, a CDO manager, andrealized his credit default swaps werebeing used to synthesize more CDOs(143; 136-44). Charlie Ledley and BenHockett of Cornwall Capital at the LasVegas event sensed that the collapse of the market would be soon and try to bymore credit default swaps (144-50). There were 7000 people making moneyoff subprime mortgages at theconference (151). Eisman and hisassociates wondered at the absurdity of the situation and at the mediocrity of theratings-agency personnel (151-57).Unsure of the proportions of morons tocrooks, they subsequently doubled theirshort position in subprime mortgagebonds to $550 million and also shortedstock in Moody's (157-59).
Ch. 7: The Great Treasure Hunt.
When Cornwall Capital tried to increasetheir short position, they ran intoinstitutional resistance, though $50billion more in new CDOs were createdand sold between February and June2007—a final squeeze from a rottenorange (160-66). Then Bear Stearnscollapsed (166-67). Eisman discoveredthose running both ratings agencies andbanks were delusional—or even "dumb"(167-74). Eisman shorted Merrill Lynch(175). To contradict Ben Bernanke'sSenate testimony, Eisman hosted aconference call predicting larger losses;an article in
Grant's Interest RateObserver
confirms his belief (175-78).
Ch. 8: The Long Quiet.
Dr. Burry, thefirst to understand the subprimemortgage problem, discovered he hadAsperger's Syndrome when his sonstarted displaying the same symptoms(179-83). Being right proved to be anordeal for Burry, but one that finally paidoff in 2007 (183-99).
Ch. 9: A Death of Interest.
In thischapter, Lewis goes back in time anddescribes the development of the CDOsin Morgan Stanley's asset-bonddepartment (on their early history see254) and the creation of essentiallyfraudulent credit default swaps by HowieHubler (who was allowed to set up a"proprietary trading group" called GlobalProprietary Credit Group, or GPCG); thesecredit default swaps were designed to bebets almost certain to pay billions of dollars; the essence of the scheme beingthat "[t]he pretense that these [subprimemortgage] loans were not all essentiallythe same," and thus not all likely todefault at the same time —Huber, wholost more money than any trader in thehistory of Wall Street (about $9 billion) actually "trusted the ratings" of the ratings agencies, and gambled that