Excellent interview with Michael Lewis on the “oddballs” who made the big short.

Here on Bloomberg. Very long but worth the time — just put it on in the background.

He says that the only guys doing serious credit analysis on mortgage bonds in 2005, 2006 and 2007 were those looking to find the very worst and go short.

Also, Goldman would have been just another bagholder if the market had cratered a year before it actually did. They didn’t start to get their trading book in order until Spring 2007.

So, who does he think were the villians? Not just guys who were going with the flow, but the knowing perpetrators. He fingers bankers such as those at Goldman who created and sold synthetic CDOs and pushed them on firms like AIG. Goldman and certain people there are among the “genuine elites” and don’t have a “sense of social obligation.” Basically, they have no shame.

The TARP recipients were “unnaturally selected.”

As much as I like Michael Lewis as a narrator, I do not agree with his take on the role of government. He still believes that regulation can contain the market. When Goldman owns the regulators, it just can’t. Markets find a way around regulations, and connected players find ways to use regulations as a weapon. Simply take away the moral hazard of the Treasury and Fed, and these firms would have had the incentive neccessary for caution.

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