Michael Lewis

They owned a lot of this stuff.

And not only because they had bought the actual loans, they used derivatives to replicate the absolute worst of them.

So it's like the stupidest loans, in theory, replicate them infinitely.

And so not only did we have like hundreds of billions of really dumb loans, but you had possibly infinite number of similarly stupid bets, all kind of concentrated in the heart of the financial system.

On the other side of this,

were a handful of smart people who took the other side of the bets.

And my book, The Big Short, tells the story of the financial crisis through the eyes of the people who were on the right side of the bet.

All right, the market wakes up to how bad these loans are.

The banks all basically would have failed.

Even the ones that didn't go all in on it, where they were so tied to the other banks.

The whole financial system was going down, like bankrupt.

If this had happened in 1929 before the Federal Reserve grew a pair, it would have been just depression.

It would have been 35% unemployment.

It would have been cataclysmic.

The Federal Reserve and the U.S.

government steps in and guarantees.

Basically, I mean, this is crude.

Think of it as they guarantee all the loans.

They say, we're going to make everybody whole.

We're going to take these off.