The Big Short Movie

There is a reason why Greg Lippmann had picked Wing Chau to sit beside Steve Eisman. If Wing Chai detected Eisman's disapproval, he didn't show it; instead he spoke to Eisman in a tone of condescension. I know better. "Then he says something that blew my mind," Eisman said. "He says, 'I love guys like you who short my market. Without you I don't have anything to buy.'"

Say that again.

"He says to me, 'The more excited you get that you're right, the more trades you'll do, and the more trades you do, the more product for me.'"

That is when Eisman finally understood the madness of the machine. He and Vinny and Danny had been making these side bets with Goldman Sachs and Deutsche Bank on the fate of the Triple-B tranche of subprime mortgage-backed bonds without fully understanding why those firms were so eager to accept them. Now he was face-to-face with the actual human being on the other side of his credit default swaps. Now he got it: the credit default swaps, filtered through the CDOs, were being used to replicate bonds backed by actual home loans. There weren't enough Americans with shitty credit taking out loans to satisfy investors' appetite for the end product. Wall Street needed his bets in order to synthesize more of them. "They weren't satisfied getting lots of unqualified borrowers to borrow money to buy a house they couldn't afford," said Eisman. "They were creating them out of whole cloth. One hundred times over! That's why the losses in the financial system are so much greater than just the subprime loans. That's when I realized that they needed us to keep the machine running. I was like, This is allowed?"

Danny and Vinny looked at them through the hibachi steam. As far as they could tell, Eisman and Wing Chau were getting along famously. But when the meal was over, they watched Eisman grab Gregg Lippmann, point to Wing Chau, and say, "Whatever that guy is buying, I want to short it." Lippmann took it as a joke, but Eisman was completely serious: He wanted to place a bet specifically against Wing Chau. "Greg," Eisman said, "I want to short his paper. Sight unseen." Thus far Eisman had bought only credit default swaps on subprime mortgage bonds; from now on, he figured, he'd buy specifically credit default swaps on Wing Chau's CDOs. "He finally met the enemy, face-to-face," said Vinny.

Eisman noted that the guy's financial statements didn't actually disclose any of the really important details about the guy's company; but, rather than simply say that, he lifted the statement in the air, as if disposing of a turd. "This is toilet paper," he said. "Translate that."

"The Japanese guy takes off his glasses," recalled a witness to the strange encounter. "His lips were quavering. World War Three is about to break out. 'Toy-lay paper? Toy-lay paper?'"