Amazon shares the top Kindle highlights from Michael Lewis' 2010 book.
Credit: Jaap Buitendijk
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Before Adam McKay’s The Big Short portrayed the 2008 mortgage crisis in wicked satire on the big screen, Michael Lewis revealed its ignominious realities in his 2010 book of the same name. Lewis’ striking account earned it a long run as a best-seller, and the film adaption was similarly successful. Ahead of the movie’s five Oscar nominations, Amazon has shared the top Kindle highlights for its in-print inspiration. Take a look at the most popular passages:

  • “How do you make poor people feel wealthy when wages are stagnant? You give them cheap loans.”

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

  • “The CDO was, in effect, a credit laundering service for the residents of Lower Middle Class America. For Wall Street it was a machine that turned lead into gold.”

  • “A mortgage bond was a claim on the cash flows from a pool of thousands of individual home mortgages. These cash flows were always problematic, as the borrowers had the right to pay off any time they pleased. This was the single biggest reason that bond investors initially had been reluctant to invest in home mortgage loans: Mortgage borrowers typically repaid their loans only when interest rates fell, and they could refinance more cheaply, leaving the owner of a mortgage bond holding a pile of cash, to invest at lower interest rates.”

  • “These companies disclosed their ever-growing earnings, but not much else. One of the many items they failed to disclose was the delinquency rate of the home loans they were making.”

  • “Real risk was not volatility; real risk was stupid investment decisions.”

  • “The big fear of the 1980s mortgage bond investor was that he would be repaid too quickly, not that he would fail to be repaid at all. The pool of loans underlying the mortgage bond conformed to the standards, in their size and the credit quality of the borrowers, set by one of several government agencies: Freddie Mac, Fannie Mae, and Ginnie Mae. The loans carried, in effect, government guarantees; if the homeowners defaulted, the government paid off their debts.”

  • “To succeed in a spectacular fashion you had to be spectacularly unusual.”

  • “In Bakersfield, California, a Mexican strawberry picker with an income of $14,000 and no English was lent every penny he needed to buy a house for $724,000.”

  • “They took giant pools of home loans and carved up the payments made by homeowners into pieces, called tranches. The buyer of the first tranche was like the owner of the ground floor in a flood: He got hit with the first wave of mortgage prepayments. In exchange, he received a higher interest rate.”

The Big Short
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