Southwest Michigan Realtor

By Michael Delaware, REALTOR®

Book Review: ‘The Big Short’ by Michael Lewis

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If you have ever wondered where your equity went in your home, the answers lie in a book written by Michael Lewis entitled ‘The Big Short: Inside the Doomsday Machine’.

The Big ShortThe book carefully unravels the incidents behind the scene on Wall Street that led up to the crash of the real estate and mortgage market starting in 2005 or 2006.

Sparked by policies created during the Clinton administration in the White House, when the sub-prime loan was introduced to loan money to the poor for housing, this type of lending was exposed in as early as 1997 and several companies engaging in these practices went bankrupt at that time.  However, the model was continued and used as an instrument that evolved into what amounts to a massive Ponzi scheme of the mortgage industry that lasted over a decade, and ultimately crashed the economy.

This book is very enlightening, and is well worth the read.  In March of 2010, when the book was released, the New York Times had this to say about it: “When the crash of the U. S. stock market became public knowledge in the fall of 2008, it was already old news.

The real crash, the silent crash, had taken place over the previous year, in bizarre feeder markets where the sun doesn’t shine, and the SEC doesn’t dare, or bother, to tread: the bond and real estate derivative markets where geeks invent impenetrable securities to profit from the misery of lower- and middle-class Americans who can’t pay their debts. The smart people who understood what was or might be happening were paralyzed by hope and fear; in any case, they weren’t talking.”

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