The Big Short by Michael Lewis

I decided it was time for me to learn more about what happened with the bailout, so I took this off the bookshelf.  Web had read it a few months back.

Michael Lewis is one of my favorite non-fiction authors.  In past years I've read Moneyball, The Blind Side, and Liar's Poker.  Malcolm Gladwell describes him a "the finest storyteller of our generation" and I agree.  This book is about the financial meltdown.  Particularly, Lewis writes about a few oddball bankers, some on the fringe of Wall Street, who accurately predicted the mortgage-backed securities crisis.  Lewis profiles some colorful people on both sides of the situation - those who bet on these securities and those who bet against them. 

The most interesting part of the book, aside from the personalities, was that because he was profiling people who bet against the industry, he had to explain in detail to the reader one of the strangest financial instruments: the credit-default swap.  Basically a credit-default swap is insurance you buy against a particular security dropping in value, except you don't have to own the security to own the insurance.  It's a really strange security that spawns a really strange market that is at the core of the meltdown.  Michael Lewis says in his book, "Dear Reader: If you have followed the story this far, you deserve not only a gold star but also an answer to a complicated question..."  And thank goodness, because I sweated through a couple of those pages.

This book rounds out a few places where I've learned about the crisis; the same week I read this book we caught HBO's excellent Too Big to Fail documentary.  A few months ago I listened to This American Life's episode about Magnetar, one of the hedge funds in the middle of the crisis.  And last week's New York Times Magazine had a cover story on Sheila Bair, the outgoing chairwoman of the FDIC.  Together, those pieces of media gave me a good grounding on what the heck happened to our banks.