Summary of The Big Short / Instaread, Inc (ePub)

Inside this Instaread Summary:

Overview of the entrie book

Introduction to the important people in the book

Summary and analysis of all the chapters in the book

Key Takeaways of the book

A Reader's Perspective

Preview of the earlier chapters:

Chapter 1

In December of 1991, Steve Eisman was working for Oppenheimer and Co. as an analyst and became

known for his knack for ignoring consensus, an analysis of a stock's future sales and earnings.

In the early 1990s, the Salomon Brothers trading floor began a whole new bond market by packaging

mortgages into bonds. In this way, they began to tap the unused equity many people had in their

homes, driving the interest rates of mortgages so low that even those with less than perfect credit could

get low rates. This led to a surge in subprime mortgages, mortgages offered to those with poor credit

ratings. Subprime mortgages were then packaged into bonds and sold to investors.

Eisman hired accountant Vincent Daniel to help him decipher the suspicious accounting used by

subprime mortgage originators. Daniel discovered companies were booking profits for expected future

values of loans, and prematurely displaying themselves as profitable. However, they were failing to

reveal the delinquency rate of the home loans they were making, claiming that they were selling these

loans to be packaged as bonds, so their risk was limited. An example of this was Long Beach Savings,

one of the first banks to implement what was called the originate and sell method, a method of

originating a loan that was likely to be defaulted on and sell it to another lender, but leave it

on the books to appear as profit...

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